It’s a question every potential homebuyer must ask themselves before taking the plunge to homeownership. When looking for a mortgage in Windsor, many would-be homebuyers make the mistake of assuming that if they can afford their rent they can afford to pay a mortgage. This isn’t the case. Expect to spend more on home ownership than rent: condo fees (if applicable), property taxes, insurance, maintenance and repairs; all factor into the equation. Below are a few things to consider as you decide whether you should continue renting or if it’s finally feasible to settle down and begin paying off a mortgage.
It’s a good idea to rent when…
You’re not ready to stay in one place
Do you see yourself staying in the same location for at least five years? It’s a good time to rent when you’re living a bit nomadically, a good time to buy when you’ve found the neighbourhood you want to call home.
Your budget is too tight
Paying your monthly mortgage and everything associated with homeownership means your budget must be flexible. This is why lenders use a mortgage stress test to decide whether applicants can actually afford to continue paying off their mortgage even when their finances get out of sorts. Global News recommends adding $600 a month to every $100,000 on your mortgage balanceto help you decide if you could pass the stress test.
Your credit score is a ‘credit bust’
Your credit score plays a major factor in your mortgage. It’s the difference between a low-interest rate and a higher interest rate. This can affect how much your monthly payments will be per month. Naturally, lenders are less willing to approve your mortgage application if your credit score is too low. You can improve it by paying your credit card balance below 30% of the maximum limit, paying bills on time, and correcting any errors on the credit report.
Do consider buying when…
You have enough for a down payment
You’ve saved on your own for years, and now you have enough for a down payment. Congratulations! If it feels like an achievement, that’s because it is. Budgeting and setting aside a monthly amount to apply to a down-payment is no easy task, and it usually means you’re financially ready to make the transition to homeownership.
You pass the mortgage stress (with flying colours no less)…
Saving for a down payment is one thing – passing a mortgage stress test confirms your household has a foundation to purchase a home. If you can prove to lenders that you can still pay your mortgage in Windsor even during financial hardship (e.g. an extra $600 per $100,000 on your mortgage as mentioned previously) chances are they’ll want your business.
Budgeting for mortgage expenses is no problem
You’ve saved for a down payment, passed the mortgage stress test, have written down the mortgage expenses along with the typical monthly expenses for living, and double-checked to ensure these expenses align with your monthly earnings. If everything looks good and paying these expenses leaves you with enough money to live comfortably, it’s time to reach out to a mortgage broker if you’re interested in homeownership.
Reach out to me today and let’s have a chat about how we can make homeownership a viable option for you.