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Jun 1, 2014

Get To Know Your Mortgage: How Much Can You Afford?

by Tahnya Kristina

Tanya Kristina

If you are thinking about investing in real estate the first question on your mind may be, “Can I really afford to buy a home?” The answer is simple–yes, you can. With the right financial planning you can absolutely afford to buy a home--the secret is to be flexible and set realistic goals. Maybe you can’t afford to buy a big home in your ideal neighbourhood, but that’s OK; maybe you can afford to buy a condo in your second choice neighbourhood. If you want to buy a home you can do so in four easy steps: set a budget; determine your list of priorities; figure out how much you can afford; and then start shopping for your home.


Your Budget Starts With Your Interest Rate

A mortgage loan is a big investment–and it’s also a huge debt. How much you can afford to pay every month starts with your interest rate. So, get online and get shopping for the best deal.

There are several advantages of shopping online such as convenience and flexibility, but the biggest advantage of shopping for your mortgage rate online is that you will receive completely unbiased information instantly.

Kelvin Mangaroo is President of, a financial website with the mission of empowering Canadians by helping them search for and compare personal finance products on the market. Mangaroo says, “Shoppers can search the market to find the best mortgages rates from banks, credit unions and brokers, choose the best product for them and get in contact with the provider through our service.”

Financial institutions often take client loyalty for granted—but don’t let them take advantage of you. If you are a long time client, your personal banker may not think that you are going to leave for a competitor so they won’t offer you the best deal on interest rates from the get go. That’s why it’s important to find out what other banks are offering and to use that information as negotiating power with your financial institution. Using unbiased websites such as will help you find and compare up-to-date rate information; it also saves you the time of having to visit each financial institution’s individual website.

Mangaroo confirms that Canadians can save thousands of dollars by shopping around to find the best mortgage rate available. “Based on a typical five-year mortgage term and rate, the average consumer will save $6,981 by [comparing interest rates]. Over the course of a 25 year amortization, those savings [increase] to $34,907. A mortgage is such a huge financial commitment; any interest savings have a tremendous impact over time.”

What Are Your Mortgage Priorities?

A mortgage is most likely the biggest financial commitment that you will ever make so you have to make sure you get the best of everything–and this goes beyond the interest rate. Think about the service from your financial institution: are you happy with their service? Consider the location proximity to your home or place of work: is it convenient? And most importantly, always make sure that you trust the advice from your financial institution: make sure they always have your best interests at heart.

Getting the best service is not always about the cheapest rate, says Mangaroo. “Some lenders offer flexible features and perks, such as prepayment options. Depending on your payment strategy and [personal] situation, these features could save you money in the long run and help you avoid mortgage penalties and fees.”

After you have researched the current mortgage offers online and have made an appointment at a financial institution, bring your research with you to the appointment. Mangaroo says that it will work to your advantage when negotiating your interest rate. “Research shows that [banks are] more likely to give you a better rate if you show you've done your homework on the market.”

Calculate Your Mortgage Options

Before you start looking for a home, you need to know how much you can afford. Of course you can make an appointment at your financial institution and get a mortgage pre approval–or you can calculate how much you can afford from the comfort of your own home.

Using an online Mortgage Affordability Calculator will help determine how much you can afford for a mortgage payment each month based on your personal income and current debt obligations. Laurie Salvis is 31 years old and bought her condo in Montreal, Quebec in 2010. Her biggest concern when deciding to buy a home was the financial aspect of being a young homeowner: she wanted to know if she could afford it.

The idea of buying a home was something Salvis wanted to do, but she wasn’t sure if it would fit into her budget so she sought out professional financial advice.  “I needed someone to help me budget and reassure me [that I could afford to buy a home]. I needed advice from someone I could trust,” says Salvis. She made an appointment with a financial advisor to put her finances in perspective and it helped her realize that she could afford to buy a new home.

There are additional costs beyond the purchase price of a home that need to be taken into consideration when deciding whether you can afford to buy a home. Moving expenses and notary fees are one-time expenses associated with buying a home; but annual property taxes, monthly utility bills and monthly condo fees (if applicable) are all ongoing expenses that need to be factored into your monthly costs in addition to your monthly mortgage payment.

Start Shopping For Your New Home

Now that you know what to expect with home ownership you can take the next steps and start looking for your new home. If you are thinking about buying a home or refinancing your current mortgage then get on your computer, get online and start researching your options including finding current interest rates and using mortgage calculators. Knowledge is power; when it comes to your mortgage, loan knowledge is negotiating power–that means saving lots of money.

Tahnya Kristina

is a certified financial planner and professional financial writer with 14 years of experience.  She enjoys helping people pay down their debt, make smart investment choices, learn to stay on budget and achieve financial success. You can contact her on her website, or via Twitter @TahnyaKristina.