Test Driving a New Mortgage - Why It's Important

2016-05-12 | 14:07:31

Don’t be Caught Unprepared with Your Mortgage Payments

Preparing for a new mortgage is no small feat. Whether you’re a first-time homeowner or you’ve had plenty of experience in the housing market, it’s important not just to guess, but to know exactly what you can afford. Many of us assume that we can just adjust when the time comes, but there are steps that we can take to prepare ourselves (and our bank accounts) for a new or a larger mortgage. Taking the time and effort to prepare will not only ensure that you are not over reaching, but may also help you realize that you can actually reach further.

Knowing what you can afford is one thing, but actually living with the payments is another. With the excitement of buying a new home, it’s easy to get wrapped up in making the move instead of how your payments are going to affect your desired lifestyle. Instead of being taken aback by the shock of seeing your new payments deducted from your account each month, you can try them out on your own.

This table will help you calculate how much a mortgage increase might add to your monthly payment.

Mortgage Increase              Monthly Payment

$10,000                               $45.75
$25,000                               $114.37
$50,000                               $228.74
$100,000                             $457.48

Based on a 2.69% 5-year fixed rate* amortized over 25 years.
*Rates vary daily


So what’s the trick? How do you test drive a mortgage? It’s not only about knowing the numbers, it’s about practicing the lifestyle that will come with the payments. A few months prior to making the plunge into your new mortgage, try it out by making the increased payments into your savings account, or another safe place – such as a trusted friend or close relative. With the excess money being stored in a safe place, it will not only be accessible to aid you later on if you need it, but you will be able to experience what the mortgage increase will do to your lifestyle. Replicating this new payment will confirm that you can maintain your other expenses before actually taking on your new mortgage, ensuring security and certainty in your future financial decisions.

 

Original Post by Dustan Woodhouse