Choosing a Budget for your Chatham-Kent Mortgage

Buying a home in Chatham-Kent can be stress free, if you follow a few simple rules. First, when you receive a pre-approved loan from the bank, the amount they approve you for is likely well above the amount you should actually spend when buying a home in Chatham-Kent. If you spend to the max, you'll likely find yourself in more debt than you can handle.

What banks don't tell you is that your available mortgage is calculated based on the maximum amount you are able to pay them back. This doesn't include repairs to the home, your vehicles, food, taxes, insurance, and the other costs of living. The lesson in this? Do your homework before a home in Chatham-Kent and don't spend the maximum amount you've been approved for. Stick to a firm budget.

How to manage a mortgage on your Chatham-Kent home

The first step in this process is purchasing a home in Chatham-Kent that you can afford to pay for, and at the same time, pay for the everyday cost of living. If you buy the house and three months later your air conditioner, pool pump, and dishwasher die, you had better have money saved to cover these costs. After you find a home in Chatham-Kent at a price point you can afford, here are a few rules for managing your mortgage that will keep you out of debt and help you own your home faster.

  • Keep three months payments in the bank: This might sound extreme, but keeping three months worth of mortgage payments in your bank account is a safe practice. If someone in your family loses their job, you lose a large contract at work, or you have an unexpected expense, having this reserve fund will save headaches and heartache. If you are able to save more than the three months worth of payments, check out my next tip for managing your mortgage.
  • Overpay when possible: When your budget permits, overpaying on your mortgage is the best investment you can make. Not only does it take time off the term of your mortgage, it can also save you hundreds, or even thousands of dollars. Most people would jump at an investment these days that is guaranteed to pay 5% or more. That is exactly what paying extra, either on each payment, or in lump sums each year, off the principle of your mortgage can equate to. You'll save your interest value off of each dollar you overpay. If you do this regularly, you'll be surprised how much quicker you'll own your Chatham-Kent property.
  • A shorter term equals a cheaper house: Making the term of your mortgage 10 or 15 years, compared to 25 or 30 years will save you tens of thousands of dollars. Banks make their money by accumulating interest over years. During a ten year term, you pay for example, 5% for each of those years. If you're paying for 30 years however, you'll pay the 5% for 20 extra years. You can also reduce the term of your mortgage by paying bi-weekly, compared to monthly.

Do your research before purchasing a home in Chatham-Kent

Most of the stress associated with making your mortgage payments, making extra payments, staying within your means, and owning your own home in Chatham-Kent quickly, can be avoided by a little research. Almost every bank offers an online mortgage calculator with current rates. These calculators will show you your base payments, how much is paid toward principle per month, and how much interest you pay per month, and over the term of the mortgage.

If you still have questions, ask me. I'm always available to help Chatham-Kent homebuyers throughout the process, even if it is after you've bought or sold a home. Feel free to contact me via my Chatham-Kent real estate website or give me a call at 519-360-0141.