How to Manage Your Mortgage

What You Should Think About When Financing Your Home

If you’re like most Canadians, your home is probably the most important

investment you’ll ever make. Whether you’re buying a home or refinancing

your existing home, making the right decision now can help save you money

and provide greater financial stability for your family in the future.

To help you make an informed decision, Canada Mortgage and Housing

Corporation (CMHC) offers the following tips on what you should think about

when financing a home:

Calculate in advance how much home you can afford.

Mortgage

Professionals use a few variables to determine the maximum mortgage you

can afford: your household income, your down payment and your debt

payments including your new planned mortgage along with major related

expenses such as property taxes and heating.

Consider getting a smaller mortgage than the maximum amount

you can afford.

Your future financial picture may not be the same as it is

today. By taking on a smaller mortgage than the maximum amount you

can afford, you will gain the flexibility and peace of mind to manage your

other obligations today and deal with any unforeseen events that might

occur in the future.

Evaluate the impact rising interest rates could have on your

monthly payment.

For many homeowners, a rise in interest rates could

have a significant impact on their housing costs. For example, if you are

renewing a mortgage of $250,000, an increase of just 2 percent in the

interest rate could cost you around $300 extra each month. Evaluating the

impact of future interest rate increases today could help you avoid

potential financial difficulties tomorrow.

Become mortgage free faster by reducing your amortization period.

Choosing an accelerated payment option (equivalent to one extra payment

per year), making lump sum payments or increasing your regular payment

amount all contribute to reducing your amortization period. For example,

making one extra payment per year on your 25 year mortgage will make

you mortgage-free 5 years sooner.

(Source: Canada Mortgage Housing Corporation)