Honesty is the Best Policy | Especially When Calculating How Much You Can Afford
The excitement grasps you and you feel that you will do anything to own this house.
The lack of understanding of personal budgets can make the house of your dreams turn into a nightmare as the bills pile up and you don’t know were to turn. Most people are not aware of the gaps in their knowledge of personal finance and how it can impact their mortgage. The purpose of this article is too fill in the gaps between what we will like and what we can afford.
As examples here a two tales of woe:
Marie was a first-time home buyer. She began going to open houses on a regular basis and in no time fell in love with a home. Unfortunately, she had to mortgage herself up to her eyeballs to get into it.
The excitement of the new house soon wore off. Marie hated her job and her boss but Marie had to tough it out because she had that hefty mortgage to feed every month. She thought she could cut out shopping with the girls, eating out and the clubs on the weekend. It started with a splurge, she would catch up next month and soon her old habits began to reassert themselves. Marie was miserable…Marie was trapped. Inch by inch her credit card payments began to eat into her monthly budget until she started to have to use her cards just to get through the month. Her lack of understanding of her lifestyle requirements placed Marie between a rock and a hard place
Our next client was Ken, who was a homeowner who was induced by an advertisement to refinance. He switched to lender who offered a good rate for a 5 year term. Ken however had a second mortgage that needed to be refinanced in a year. The main reason for the second was when Ken purchased the home the lender wouldn’t advance the entire amount of the mortgage. However, the bank manager was sincere in his belief that in a years time the bank would be able to refinance the entire amount. The recommendation of the mortgage broker was to take a one year term at a slightly higher rate. This would give Ken flexibility in refinancing the 1st and 2nd at conventional rates. One year later the loans officer no longer worked at the branch. The termination fees and the rollover of the second mortgage exceeded the loan to value that Ken could get a the branch. The second mortgage lender wanted to move on and the 1st mortgage lender did not want to refinance the balance…what would Ken do.
Trust me when I say that Ken and Mary aren't stupid. However, when it came to making important mortgage decisions, Ken and Mary were certainly not smart. Mary didn't understand what amount of mortgage debt she could truly afford. Ken didn't understand how to make refinancing decisions.
The role of the mortgage broker in BC is to outline the pitfalls that clients can avoid and in the process live happier and more prosperous lives.
Duncan Seward
BC Mortgage Broker
604-644-0826
This site is under copyright by the bcmortgageactioncenter.com. We respect the privacy of our clients. We are licensed home mortgage brokers. This site is the property of www.duncanseward.com. If you wish to contact the web master he can be reached at 604-644-0826.