Buying your first home can be very exciting. You look at beautiful properties. You imagine where your furniture will go. You save for a down payment and then realize that you can’t afford to eat or put gas in your car because you weren’t able to properly budget your monthly mortgage payment. Before you have to start selling your possessions to buy your dream house, use an affordability calculator.
This very specific calculator will give you insight into your finances. An affordability calculator shows you what mortgage payments you will be able to afford based on your lifestyle. Some people make the mistake of looking at properties before figuring out what they can actually afford to buy. By using an affordability calculator, you can determine the exact amount of mortgage payments you will have to make each month without sacrificing the other expenses you need to live.
Because the affordability of the home you wish to purchase is based on the household income of the applicants who are trying to buy the property, you need to ensure you have a steady income. If you are self-employed, don’t fret. Your income may vary, but you will still be eligible for a mortgage based on the previous two years of income you’ve earned.
The calculator will ask you:
All these factors are input into the affordability calculator. The tally will determine what you can afford.
The short answer is yes. Obviously, the higher your down payment, the less you’ll have to pay for your mortgage in the long run. That doesn’t mean you need to start selling your possessions in order to have enough to put down 20%.
In Canada, if you can’t afford to put down 20% of the home’s asking price, you will need to purchase mortgage insurance. Let’s say you can only afford a 5% down payment. Mortgage insurance will be required and with any type of insurance, you will need to pay a premium. These premiums are not astronomical, but they will increase the amount of your monthly mortgage payments by about $5-10.Back
Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).
Everyone who is looking to purchase a home will need a mortgage. But, what is a mortgage exactly and why do you need it? Besides being the term to describe a loan secured by real estate, a mortgage allows you to access funding to procure your dream home.
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