Budgeting for Home Ownership

Calgary Housing AffordabilityIf you're in a good position to finally purchase a home, do you know how much you can really afford?

Even with a large down payment and good income stream, it can be difficult to figure out how much to spend. This is why it's so important to get a rough idea before you shop, which is what you can get from an online mortgage calculator.

These are great starting points because they give you insight as to what your payments would be monthly, based on your interest rate, down payment and the cost of the home. If you are interested in using one of these, then take advantage of the mortgage calculator made available on our website. This will require you to input a little bit of information, including debts you already have.

Learning to Budget for Home Ownership

To give you an example; say you wanted a home for $505,000. Now, if you could provide a down payment of $75,000 and got a 25-year amortization with 5-year interest at 4%, what would your monthly mortgage payment be? According to the calculator, it would be $2,310.

Most people making a good income (let's say around $125,000/year) would say that this is definitely doable. But, before you go out and purchase a home based on this information, consider some expert advice.

Jennifer Bissonnette, who works for RBC as a mortgage specialist, says that you should consider looking for a home that gives you a little wiggle room and that you shouldn't purchase a house at the maximum of your budget. If you do this, you could be simply living to pay your mortgage, which isn't going to give you much breathing room per month.

Weighing Housing Expenses

It's important to be realistic and use online calculators with caution, says financial expert Laura Parsons. She goes on to say that there are other things to consider than just the number that the calculator gives you.

By working with a mortgage professional you can get a new perspective on costs when it comes to purchasing a home. For example, you might want to start a family, change careers, purchase a car or deal with other life changes that cost money.

By considering all of these things, you will be able to determine if you're really comfortable borrowing x amount of dollars from the bank. In addition to this, you have to consider homeowner's insurance, costs to maintain the home, any homeowner's fees (condo fees), utilities and other things that add up throughout the month and year.

So, how should you navigate through the process of purchasing a home? According to financial expert Mary Stergiadis, you have to first think about shelter costs (i.e., interest, tax, fees).

After that, you have to divide monthly expenses by your total income. Never spend more than 35% of your total gross income on housing, she warns. The next step will be to get pre-approval for a mortgage, but make sure you don't expect to pay the maximum that you're able to qualify for.

From here, you will be able to find a home that you truly can afford, with all things considered.

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