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Test Drive your new mortgage payment today.

 In both rising markets and softer markets there will always be people contemplating a move to a larger home, often with a larger mortgage to accommodate. How many of us takes steps in advance to prepare for a payment increase?  From what I have seen, very few of us. (myself included)

We test-drive cars before we buy, we try on clothes before we buy, we even sample wines or beers before we commit. Although perhaps these are not great examples as we tend to finance cars, and shop on credit. However a home purchase is a far more serious commitment and when it comes to taking on a higher mortgage, few of us take the new monthly payment around the block for a spin. Instead we are often so caught up in the many other aspects of making a move that when that first payment is withdrawn there can be a degree of post-closing payment shock. For many it starts to settle in by the fifth payment or so.

Knowing your numbers in advance is one thing, living with the numbers in advance is quite another.

Here is a table for quickly calculating how much a mortgage increase will add to your monthly payment.

Mortgage Increase                   Monthly Payment

  • $10,000                                   $45.75
  • $25,000                                   $114.37
  • $50,000                                   $228.74
  • $100,000                                 $457.48

Based on a 2.69% 5-year fixed rate amortised over 25 years. **rates vary daily**

The key to this is not simply doing the math and knowing what you future payments will be; the key is to actually increase your current mortgage (via the prepayment privileges on the current mortgage for instance) by the corresponding amount. Try making the new payment for a few months prior to taking action. Alternatively, you may choose to withdraw an amount equal to the proposed increase from your account and stash it in a ‘safe’ place such as a savings account (not your sock drawer, that is not an actual safe place), or a perhaps a parent’s care. The key is to start replicating that new payment and confirm you can live with it prior to actually taking it on.

I am always available to discuss your detailed figures and plans.

Thank you.


Dustan Woodhouse[/vc_column][/vc_row]