Buying the first house you really want may not always be the best financial choice

Consider a modest first home mortgage

First-time home buyers encouraged not to overextend themselves

In our years of being employed as mortgage lenders, it has always been instilled in us to positively guide those first time home buyers to not over extend themselves. To you, it’s like the purchase of that first vehicle. You would really love to buy that Mercedes but can you afford it? You get that rush thinking how great it would be sitting in those heated leather seats but when you sit down and do a financial budget, you know you can’t afford it. So instead you are willing to let reality set in and purchase a vehicle that’s reliable and you can afford to place insurance on it and have enough left over from your pay cheque to fill it up. You can even have money left over for a little bit of a savings account and other living expenses. As you go along your life path you know that expensive vehicle will be a target to achieve when you have the financial where-with-all to purchase it.

The same can be said when you look for your first home. It would be great to have that larger, two-car garage home with a fantastic lake view and a nice yard. Initial thoughts are you can afford it but it will be tight financially. The right thing to do would be to start off with a lesser sized home that will be in your budget. Yes, it isn’t your dream home but it is an asset you can call your own. That larger home can be something you can strive for.

Our reasoning for lowering your expectations to a smaller unit to live in is for the following reasons:

1.) For example, payments on a $150,000.00 mortgage will be less, in most cases, than you would be paying for rent.

2.) You never know what the future may hold but one thing we, in the financial business know, is interest rates today are at historic lows. In considering what type of home you purchase you must realize that rates will eventually climb higher. Saying that, when the mortgage interest rate on that $150,000.00 climbs by even two per cent and your wages do not increase, the strain on your finances will weigh heavy on your life style. Now, imagine if your mortgage was double the $150,000.00 amount, what affect would that interest rate increase have on you.

3.) You could hopefully build up equity in your home quicker by making your mortgage payment higher. For example, rather than have your payments calculated on a 25 year amortization, set them at a 20-year amortization instead. Also, have your payments set up on an accelerated bi-weekly or weekly payment schedule. By doing that you will pay your mortgage down faster.

Of Prime Interest is a collaboration of mortgage professionals. Darwyn Sloat:, cell: 250-718-4117; Trish Balaberde:, cell: 250-470-8324; Christine Hawkins:, cell: 250-826-2001.

Just Posted

Need to catch up on news? You’re covered

Every Saturday the Capital News will highlight stories from the week

Big White board school among best

Director of snow sports, Josh Foster, is one of the top instructors in Canada

Seniors prefer funeral to lifestyle planning

Survey finds 73% of seniors have a will, only 13% have long-term care plan

Okanagan College business students soar

Medal winners at Western Canadian Business Competition

UBCO civil engineer touts cohousing option

Gord Lovegrove says cohousing is sustainable social and economic lifestyle

VIDEO: B.C. Mounties reunite veteran with lost military medals

RCMP say Zora Singh Tatla, who served in the army in India for 28 years, is the righful owner

4 facts to ring in St. Patrick’s Day

What do you really know about the Irish celebration?

Experts urging caution as rabbits die by the hundreds in B.C. city

Province of B.C. confirms more positive tests for rabbit haemorrhagic disease

Federal government seeks public feedback on pedestrian safety

What safety measures do you think need to improved for pedestrians and cyclists?

Search continues for 10-year-old Montreal boy missing since Monday

Montreal police said they are exploring every possibility in search for Ariel Jeffrey Kouakou

Airline passenger-rights bill claws back protections for travellers: Advocate

Bill C-49 would double tarmac delays, scrap compensation for flights affected by mechanical failures

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

Canadian research vessel to explore 19th Century shipwrecks

Commissioned this week in Victoria, the RV David Thompson is Parks Canada’s newest vessel

UPDATED: ‘New wave’ of anti-pipeline protests return to Trans Mountain facility

About 100 demonstrators with Protect the Inlet marched to the Burnaby terminal Saturday

Most Read