Once my clients are pre-approved, and we’ve determined how much they can borrow based on their yearly earnings I ask the most important question in the mortgage process – “How much money are you comfortable spending per month on your mortgage payments”. Who cares what you can afford, what’s important is how much you want to spend. Some
Do not want to put the maximum down due to other expenses such as travel, dining, art, cars, clothing, etc. Therefore its important to know how much you want to spend per month when determining the mortgage amount you want to borrow. There are a number of factors to consider when calculating your monthly mortgage payment such as:
- Property tax, strata and utilities
- The type of mortgage you choose (Variable vs. Fixed)
- Current Interest Rate
Property tax, strata and utilities
When calculating your monthly mortgage payments remember if you’re purchasing an apartment, you’ll be making monthly strata payments. These payments can add on another $250-$600/month. You’ll also be paying either a yearly Property Tax bill to the Government, or have your property tax blended into your mortgage payment, and paid by your lender of choice on your behalf. Property Tax varies from home to home, but must be considered when making a purchase. Last but not least, budget for at least $75-$150 for utilities (heat, hot water, etc.). To sum it all up – When considering buying a property, add the following costs together to determine your monthly payment: Mortgage payment + Strata (if applicable) + (Property Tax/12 months) + Utilities
The type of mortgage you choose (Variable vs. Fixed)
The type of mortgage you choose plays a key role in determining your monthly mortgage payment. I won’t get into the difference between Variable and Fixed, but if interested, here’s a link to an article I wrote that highlights the pros and cons of each. What you want to consider is that if you do decide to go with a variable rate, how comfortable you will be if your Variable rate increases. If it’s manageable, great, let’s stay with a variable rate, but if not, maybe you should consider a fixed interest rate.
Current Interest Rate
Interest rates will vary week to week, and I’d recommend paying close attention to the current rates, and future trends in order to get the best deal. If this seems daunting, never fear; hire a Mortgage Professional to take care of this for you. We’ll shop all Banks and Lenders mortgage products in order to find you the best fit. But if you wish to do some calculating of your own, I’d suggest using an interest rate calculator.
An effective interest rate calculator can be an invaluable tool when considering buying a home. One can input your specific financial information, current interest rate and other mortgage specifics in order to produce the amount of the payments you’ll make. An effective interest rate calculator can also:
- Break down the amount of interest paid on your mortgage on a yearly basis. This will help you determine the anticipated yearly costs.
- Help you see how much could be saved by paying off a mortgage at an earlier date.
Let me know if you have any questions in regard to this post, and as always call, email or text me if you have any other mortgage related questions I can help you with.