VANCOUVER (NEWS 1130) – If you’re looking to buy a home in this pricey market right now, you might be offered a mortgage that seems quite generous.
Banks are warning that some people are overstretching themselves in that realm, and Jeff Schwartz with Consolidated Credit Counseling Services of Canada says just because you’re eligible for a given mortgage, doesn’t mean you should take it on.
LISTEN: Jeff Schwartz speaks with anchors Jim Bennie and Amanda Wawryk
“Over the last little while, people have felt that they are richer than they are, so much as they are going to the bank and the bank qualifies them for a mortgage, and it doesn’t look at all their expenses,” says Schwartz.
“Really, you should take a look at your own budget, and say, ‘can I afford this payment comfortably while putting money for savings, while paying down some debt, and at the same time, living in that house?’ If the mortgage is going to be too high for you to handle, then really you’ve got to look at a smaller house, and perhaps less mortgage.”
Schwartz says the formulas lenders use to establish what sort of a mortgage you can get don’t always factor everything into the equation.
“Your affordability of a mortgage payment should be based on what you have coming in, and what you have going out,” says Schwartz. “Not necessarily the bank’s idea of what you can afford, because often that might be much more than you can actually afford when it comes down to looking at your individual finances. So yes, if you could leave some breathing room into that mortgage payment, and perhaps take on less, whether that’s through a larger down payment, or even buying less house.”
Beyond mortgages, Schwartz advises you to set up a rainy day fund by having part of your paycheque automatically deducted — something you can set up with your bank.