Report on the Canadian Economy growth and strength for 2011

General Angela Calla 28 Feb

OTTAWA – Canada’s economy was surprisingly hot at the end of last year, setting the stage for another fast start in 2011 that bodes well for jobs and other economic indicators.


The economy grew a better than expected 3.3 per cent in the last quarter of 2010, a full point stronger than the Bank of Canada had predicted a little over a month ago and faster than the 2.8 per cent advance posted south of the border.

Adding to the good news, Statistics Canada revised upwards the results of the third quarter to 1.8 per cent from one per cent, enabling the country to finish the year with an overall 3.1 per cent increase in gross domestic product.

And December’s also better than expected 0.5 per cent spurt provided a strong hand-off to Q1 performance this year, economists noted.

“On balance, this report stands up to careful scrutiny in signalling greater than expected breadth of growth in the Canadian economy,” said Derek Holt, vice-president of economics with Scotia Capital.

There were three main ingredients to the strong quarter. Exports surged 17 per cent annualized, helping bring along manufacturing, which surprised on the upside, and consumer spending, which jumped 4.9 per cent.

Bank of Montreal economist Douglas Porter said the strong hand-off points to the first quarter of this year coming in even better, at around 3.5 per cent.

Porter and his forecasting group have now joined the Royal Bank and Merrill Lynch in projecting three-plus growth for all of 2011, well above the Bank of Canada’s 2.4 call.

That might get Bank of Canada governor Mark Carney, whose forecasts now appear overly dour, thinking about interest rate hikes sooner rather than later.

“We had been looking for the bank to wait until their July meeting before restarting the rate-hike process … but if there is a surprise to our rate call, it now looks like the bank would go earlier, rather than wait longer,” Porter said.

The flashing red light confronting Carney is that any rate increases while the U.S. Federal Reserves stays on the sidelines will likely light a fire under the already hot loonie. And that could snuff out the strongest performer in the economy — exports to countries with falling currencies like the United States.

The dollar has traded over par with the greenback for weeks and got another boost by the GDP result Monday, gaining about half a cent to 102.63 US cents in mid-morning trading.

Carney’s reaction to the strong numbers will be known Tuesday morning when he will deliver a short analysis along with his decision on interest rates.

Economists and the markets expect the central bank to keep its trendsetting overnight rate at one per cent, where it has been since last September.

The data was also good news for the federal government as nominal growth — which is most directly tied to tax revenues, particularly on the corporate side — jumped by 7.2 per cent on the wealth effects of high commodity prices.

Pre-tax corporate profits came in at a stratospheric 41 per cent annualized, and even wages and salaries were a strong 5.7 per cent.

But there were downside surprises in the GDP report as well. Inventory buildup fell, not usual during a recovery, and business investment in new machinery and equipment was basically flat, although the previous three quarters had been strong.


General Angela Calla 21 Feb

 As you’ve likely heard in the news lately, Canadian household debt is at an all time high with an average 150% debt to income ratio.  As a  Mortgage Expert, I can offer solutions. 

When you think you may want a fixed rate, look at our variable protection strategy. It gives  the benefits of taking a variable with the security of a fixed.  It builds in payment certainty, protects against future prime increases, and allows our clients to pay down their mortgage much quicker. 

 With the average variable VS the current fixed, this can save a total $36,543($16,289 interest + $20,254 principal) at the end of the 5yr term(we’ve even built in a .15bp increase in Prime every 6 months) Based on a 300,000.00 mortgage.

 Contact me today to see how we can help you and please share this if you believe someone you care about will benefit.

Angela Calla, AMP

Dominion Lending Centers


Why do interest rates rise so quickly but fall slowley?

General Angela Calla 18 Feb

Why do mortgage rates rise fast, fall slowly?

John Greenwood   Financial Post

Why do mortgage rates rise quickly but fall like molasses?

That’s the question posed by an article in the latest issue of the Bank of Canada Review, and it’s a good one.

The report, by Jason Allen of the central bank’s financial stability department, notes that the big banks that dominate the market tend to adjust interest rates faster when they’re on the way up than they do when rates are falling.

While it come as no surprise to borrowers that such is the case, the article draws an interesting conclusion: That such behaviour by banks and other lenders may have broader implications for Canada’s monetary policy, and that the central bank may want to take this into account when it comes time to plot strategy.

The report comes on the heels of a decision by the federal government to tighten mortgage rules as a way to head off a potential real estate bubble.

All the major lenders in this country tend to offer the same types of mortgage products, credit cards and other services, and in fact Canadians tend to treat their bank as a “one stop shop” where they buy a majority of their financial services, according Mr. Allen.

Leaving aside the issue of whether this is a healthy situation, the author concludes that the mortgage market is “consistent with a model where consumers have different preferences and skills when shopping and bargaining for a mortgage and where lenders maximize profits based on observing these preferences and skills.”

Simply put, borrowers are often complacent and end up paying more than they should.

One of the quirks of the industry in Canada is the prevalence of mortgages with terms of five-years or less, even though the loans amortize over as much as 40 years, according to the article.

Citing a recent study by John Kiff, a senior financial sector expert at the International Monetary Fund, it notes that Americans, by contrast, tend to opt for longer term mortgages than do Canadians, and they have a much broader choice.

The benefit of longer terms is that they provide the borrower with better protection against the risk of rising interest rates. If a loan is amortized over 25 years, the best way for the creditor to ensure he can always make the payments is to take a 25-year term.

Some economists refer to five-year products as “balloon mortgages” because of the possibility that the payments may suddenly shoot up at the end of the term.
Borrowers are also left vulnerable to “roll-over risk,” that the lender may be unwilling to renew the loan at any price.

According to Mr. Kiff, the main reason 10- and 20-year mortgages aren’t more common in Canada is because financial service providers consider them uneconomical.
Whenever banks make home loans they generally protect themselves from the risk that the customer may pay the money back early by including strict repayment penalties. But current regulations put strict limits on such penalties. “So the banks have this wall at five years,” Mr. Kiff said in an interview.

Bottom line: Lenders can’t charge what they feel they need to charge so they don’t offer longer term mortgages at an affordable price.

Mr. Kiff, who previously worked at the Bank of Canada, said Canadians would be better served if there was more choice of longer term mortgages. The IMF recently recommended that the federal government change the rules around mortgages so that lenders are able to provide broader product choice without unnecessary limits on how they charge for products.

What needs to happen is “at least, let the market determine where the rates should be,” he said. “What [mortgage] works best depends on the borrower, on the borrower’s own personal situation.”

More Jobs = Higher Interest Rates

General Angela Calla 16 Feb

Here we go, again. The economy is generating more jobs, a handful of banks raise mortgage rates and all of a sudden you’re being advised to lock in your mortgage before the bank doors slam shut. In fact, some say you’d better hurry up and buy a house now before mortgage rates go so high you’re locked out of the housing market forever.


This is not the first time that mortgage rates are on the brink of blooming only to fade a few months later. This has happened more than a handful of times in the last decade. The headlines are often the same. A month or two of increasing mortgage rates, the public is urged to act now, and then a few months later something unforeseen appears on the horizon.


The last occasion was just over a year ago. The posted five-year mortgage rate in March 2010 went from 4.7% to 5.15% in April, and then to 5.3% by May. The recommendations were clear: lock in. But then, by October they were back to 4.5%. The economy sputtered, Greece and Spain hit the headlines and the rest was history.


Don’t get me wrong. Short-term interest rates are abnormally low today and the Bank of Canada has pledged to raise them eventually. But that is a far cry from advocating that you lock in your mortgage – which is actually driven by long-term bond market rates – or heaven forbid using this as an excuse to buy a house you can’t really afford.


Click here to read the full article from The Star.


The commercial real estate market saw an unprecedented recovery last year, with investment growing 48% as the economy improved and investors returned to the market.


Canadian commercial real estate sales volume reached $18.9 billion in 2010, according to CB Richard Ellis, from $12.7 billion in 2009 – though it’s still a long way from the $19.8 billion posted in 2005.


“Once we were a few weeks into 2010, we could feel momentum picking up so that by the year-end, we were about where we expected it to be,” said John O’Bryan, CBRE’s Vice Chairman. “It was really a coast-to-coast recovery – something we haven’t seen before.”


The only market that didn’t see an increase in volume was London, Ontario. Toronto finished the year with $7.4 billion in trades, up from $3.8 billion in 2009 as volume grew by 95%. 


Click here to read more in the Globe and Mail.


The resurgence of the loonie and continued degradation of US home prices are spurring more Canadians to invest in property south of the border. But while this may appear an opportune time to snatch up a retirement home or dream vacation property, experts warn that jumping into these major purchases without doing extensive research is a recipe for disaster. 


The list of things to consider before buying in the United States is long, ranging from estate taxes to property maintenance to insurance. 


“There are lots of things that most people don’t think about,” says Laura Parsons, a mortgage expert with Bank of Montreal. “I know quite a few people who went into the market in the US without a lot of knowledge about what that means.” 


First and foremost, experts caution that speculative investments in US real estate continue to be a roll of the dice. 


Click here to read for the full details in the Globe and Mail.

Why do most people select a 5 year term?

General Angela Calla 14 Feb

Think Outside the Bun 

Rob McLister, CMT 

That is Taco Bell’s slogan.  It’s meant to remind us that fast food doesn’t end with hamburgers. Tacos are pretty tasty in their own right.

In the lending world, the closest equivalent to “the bun” is the 5-year fixed mortgage. Like hamburgers are to fast food, the 5-year fixed is to mortgages. It’s been the most popular term in Canada for years.

Yet, despite its prevalence, qualified borrowers owe it to themselves to think outside the 5-year fixed. A little extra risk can sometimes yield a lot more reward.

Fixed 5-year mortgages are especially popular in uncertain/rising rate markets (like today’s). People who can’t afford rate risk, and those who cannot qualify for shorter terms, often choose a 5-year fixed by default.

Even individuals with rock-solid financial resources frequently gravitate to 5-year terms. Much of the time that’s because they don’t want to overthink the safety of a longer-term mortgage. In other cases, it’s because no one has ever shown them how much 5-year fixed terms really cost over the long run. 

No matter how popular 5-year terms are, however, mortgages are not a one-size-fits-all proposition.  For those who can stomach the chance of higher rates at renewal, various compelling alternatives exist. One happens to be the 3-year fixed.

Lenders like Merix Financial, HSBC, and others still have three-year rates in the 3.35% range or better. That’s 59+ basis points below current 5-year pricing.

At those rates, (from a purely mathematical and hypothetical perspective) the 3-year fixed performs better in our internal simulations than any other term, be it a variable or a 1, 2, 4, 5, 7 or 10-year fixed.1

With major banks forecasting a 2% rate hike in 24 months, 3-year fixed mortgages model even better than variable-rate mortgages (primarily because of the 3-year’s low rate and its 36 months of rate-hike protection).

This doesn’t mean a 3-year will definitely save you more money than any other term. It just means they offer very good value with decent odds of interest savings.

On a $300,000 mortgage with a 25-year amortization, a 3.35% three-year will save you about $5,130 over a 3.94% five-year fixed. That’s over 36 months.

After 36 months, you can move into any other term you want (e.g.,  a 1-year fixed, variable, or another 3-year fixed). As long as your rate at renewal is about 5% or less, you’ll come out ahead of today’s 5-year fixed.

A few other points about 3-year terms:

  • You can make your 3-year fixed payment equal to a 5-year fixed payment, thus shrinking your amortization even faster.
  • People tend to refinance 5-year terms roughly every 3.5 years on average. Three-year terms let people out without a penalty just before many of them are getting ready to renegotiate their mortgage.

The “optimal term” (if there is such a thing) changes as rates fluctuate and as borrowers’ finances change.

All things considered, however, the three-year fixed is the sweet spot of the mortgage market at this particular point in time.

Record low rates days are numbered

General Angela Calla 11 Feb

Housing market will be stable next two years: RBC
A stronger economy will offset the effects of higher mortgage rates and
keep Canadian house prices stable over the next two years, according to
the Royal Bank of Canada.
In a market update that has the bank forecasting price gains of 0.5 per
cent in 2011 and 1.3 per cent in 2012, economist Robert Hogue said that
after two years of “gyrating wildly,” the Going forward, we see nearly
perfectly offsetting forces driving Canada’s housing market,” he said.
“On the upside, the economic recovery will gather strength in 2011,
continuing to boost employment and family incomes. On the downside,
interest rates are expected to rise.”
The Bank of Canada will likely raise interest rates by 100 basis points
this year and another 150 basis points in 2012
, he said, making mortgage
payments more expensive for the majority of homeowners. But real gross
domestic product is expected to increase to 3.2 per cent in 2011 from
2.9 per cent in 2010.
“The net effect of these forces is expected to be close to nil, thereby
leaving resale activity largely flat,” he said.
There have been a flurry of forecasts issued in the last week,  as the
market starts the year stronger than expected
Canadian housing market is likely to be a much less interesting place
for the next several years. Capital Economics issued a cautious report
that suggested higher interest rates could drive prices down as much as
25 per cent over the next three years, while the Canadian Real Estate
Association raised its sales forecast for the next two years as it
suggested that a stronger economic recovery and continued low interest
rates would keep the market balanced.
“Even though mortgage rates are expected to rise later this year, they
will still be within short reach of current levels and remain supportive
for housing market activity,” CREA chief economist Gregory Klump said.
“Strengthening economic fundamentals will keep the housing market in
balance, which will keep prices stable.”
Capital Economics economist David Madani said too many optimistic
forecasts are based on too short a time frame to be useful, because many
mortgages won’t reset until rates rise much higher than they are today.
“Let’s balance this discussion a bit and think longer term,” he said in
a recent interview. “As far as housing prices are concerned, we think
they’re overvalued and we don’t see income growth closing that gap.”

Flaherty warns of even higher mortgage rates after this week’s jump

General Angela Calla 10 Feb

By The Canadian Press

OTTAWA – Interest rates are going up, and the federal finance minister says he expects them to rise even more.

The Royal Bank increased several of its posted and special mortgage rates on Tuesday, joining TD Bank and CIBC.

All three banks have increased the posted rate for a five-year closed mortgage by a quarter of a percentage point, to 5.44 per cent.

RBC also raised its special fixed rate offer for a five-year closed mortgage by the same percentage amount, to 4.39 per cent.

Finance Minister Jim Flaherty said he’s not surprised.

“The recent increase by a couple of the banks is exactly what we expected,” Flaherty told reporters in the foyer of the House of Commons.

And more increases should be coming, Flaherty predicted, since lending rates have been hovering close to historic lows.

“We’re likely to see higher interest rates as we go forward because interest rates are still very low.”

Flaherty commented as he denounced a Liberal opposition day motion calling on the Harper government to reverse a planned 1.5-percentage-point corporate tax cut.

Lifestyle and expenses determine how much money is needed in retirement

General Angela Calla 10 Feb

By LuAnn LaSalle, The Canadian Press

MONTREAL – Your current lifestyle may impact your retirement more than you think.

Can it be sustained? How much money will it take to maintain the standards you’re used to? What will it take in RRSPs, investments, savings and private and government pensions once retired?

“Understand how much it costs to keep the lifestyle that you are enjoying today and lock it in,” says Patricia Lovett-Reid, senior vice-president of TD Waterhouse.

That sounds like a simple plan, but Lovett-Reid says many she talks to register a little shock when they hear that it could take $1 million to enjoy retirement as much as their working days.

Much of what’s needed is driven by what people intend to do once they retire, says Lovett-Reid, who writes and speaks about personal finance. Planning should take into account the expenses they anticipate will result from their spending choices once their working days are over.

Portfolio manager Adrian Mastracci says most retired couples can live on $50,000 to $60,000 gross total income from various sources per year. It can be done on less, but might not be “pleasant,” he says.

Mastracci says Canadians may not be saving enough for retirement, but he notes the economic climate as well as costs like housing and children that tend to eat up paycheques.

“I think we’re a little too hard on a lot of investors,” said Mastracci, of KCM Wealth Management Inc. in Vancouver.

Mastracci says he doesn’t believe most will need the equivalent of 60 per cent to 70 per cent of their working salaries in retirement.

“What I buy into are the expenses you have. Chances are the expenses before retirement and after retirement aren’t going to change very much, if any. Can you live on whatever that tells you?”

Lovett-Reid says 50 per cent of pre-retirement income is enough to lead a “modest” lifestyle in retirement. But she likes to use the 70 per cent rule. If the gross salary for the average couple is $63,900 at age 65, that couple would need to generate 70 per cent of that yearly in retirement.

For those going into retirement with consumer debt and mortgages, they’re going to have to get “creative,” said Gail Vaz-Oxlade, longtime financial writer and TV host.

That could mean getting a roommate, being a companion to an elderly person who doesn’t get out much, working at a part-time job or selling your house to get out of debt, she said.

“Unfortunately, there have been people who have gone into retirement thinking they can behave as if they’re still working,” said Vaz-Oxlade, whose latest book “Never Too Late” offers advice for retirement planning to those who are unsure of how to get started.

As the March 1 deadline to make an RRSP contribution looms, Canadians will hear numerous cheerful advertisements from financial institutions about making their contributions so they can retire in style. But whatever vehicle you choose to invest in for the future, in the end it will need to produce enough to match your expectations, and that’s what you should be thinking about right now.

“We were sold retirement as being the day you stop working and climb on a sailboat and head out into the Caribbean. But that’s not what retirement is for 85 per cent of us,” said Vaz-Oxlade.

“If you want to travel the world every year, you had better be socking away a ton of money.”

Canada’s housing market could prove more resilient in 2011 than predicted

General Angela Calla 10 Feb

By Sunny Freeman, The Canadian Press

TORONTO – Canadian home sales this year will be better than previously thought, helped by improving consumer confidence that will partially offset the anticipated deterrent of interest rate hikes, the Canadian Real Estate Association predicts.

CREA released a revised forecast Tuesday that estimates there will be 439,900 existing homes sold in 2011, down 1.6 per cent from 2010, but better than the nine per cent decline that CREA had forecast at the end of last year.

The real-estate association is also taking a more positive view of pricing, with the national average price now expected to rise by 1.3 per cent in 2011 to $343,300. CREA had earlier predicted that the national average home price in 2011 would fall by 1.3 per cent from last year to $326,000.

CREA’s January sales data won’t be released until next week. But recent reports on building permits and housing starts — two indicators of how much new housing will be available for sale in future — indicate a measured start to 2011.

Canada Mortgage and Housing Corp. reported Tuesday that the pace of new-home construction in Canada increased slightly last month, rising to 170,400 units, up from 169,000 in December on a seasonally adjusted annual rate.

That puts the country on a pace for about 10 per cent fewer housing starts than last year.

Krishen Rangasamy, an economist at CIBC World Markets said housing starts will likely soften over the coming months as home prices moderate and the Bank of Canada resumes its tightening cycle by mid-year.

A moderation in housing starts is a sign that supply is contracting in line with reduced demand, which could avoid an unhealthy glut of available houses on the market if demand declines when interest rate hikes are announced.

Some economists have warned that a combination of higher interest rates and new mortgage rules that go into effect March 18 could put a chill on demand in the later months of this year.

CREA predicted Tuesday that some sales that would have been made later in the year will likely occur in the first quarter, as a result of the new rules. A previous change in mortgage rules last year contributed to extremely strong first-quarter demand as buyers sought to beat the deadline.

“This is expected to produce a milder version of the volatility in sales activity that we saw last year which resulted from additional transitory factors,” said CREA’s chief economist Gregory Klump.

Last year, sales were also pushed ahead to the first part of the year as buyers in two provinces — British Columbia and Ontario — rushed to avoid a switch to the harmonized sales tax on July 1.

Those factors exacerbated the effect of interest rate hikes last summer and the market reached a trough in July.

Following last year’s pattern, sales will likely be robust in the first quarter as buyers enter the market before the tighter mortgage rules take effect and then drop off in the second quarter.

However, CREA predicts that the market will gain traction in the second half of this year as economic conditions, job and income growth and consumer confidence improve, in contrast to 2010 when economic growth softened.

“Even though mortgage interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity. Strengthening economic fundamentals will keep the housing market in balance, which will keep home prices stable,” Klump said.

The Bank of Canada has forecast that housing will be a minor net negative for the economy this year, although it also cautions the market is a potential key downside risk for the economy.

It is expected to maintain its key lending rate at a low one per cent until at least the second half of the year, as some global economic uncertainty lingers. The key lending rate has the most immediate impact on variable-rate mortgages whereas home owners with fixed-rate mortgages won’t be affected until renewal time.

The Royal Bank (TSX:RY), CIBC (TSX:CM) and TD (TSX:TD) said this week they are raising the posted rate for a five-year closed mortgages by 0.25 percentage points to 5.44 per cent.

Meanwhile, Finance Minister Jim Flaherty warned Tuesday that Canadians should expect long-term mortgage rates to rise further.

“The recent increase by a couple of the banks is exactly what we expected,” Flaherty told reporters in the foyer of the House of Commons. “We’re likely to see higher interest rates as we go forward because interest rates are still very low.”

Last week, in the gloomiest report to date, Capital Economics analyst David Madani said house prices were just a few interest rate hikes away from a 25 per cent correction over the next three years.

However, a report released Tuesday by real estate agency Re/Max suggests the Canadian market has shown resiliency in the wake of major events in the past decade, such as the 9-11 terrorist attacks in 2001, the SARS health crisis in 2003 and the 2008-2009 recession.

The report said the market has self-adjusted as inventory dwindled during periods of reduced demand.

Through tumultuous times in the past decade, fewer real-estate listings led to higher home values, with national home prices increasing at an average of 6.82 per cent annually.

The market is on track to a similar realignment this year as the number of available homes trends downward, suggesting that the market is closer to seller’s territory, in which prices spike said Christine Martysiewicz, a spokeswoman for Re/Max.

“Interest rates would have to go up significantly before we see any impact, and we wouldn’t see an immediate impact,” Martysiewicz said.

“To say that there might be another real estate bubble is really not a responsible comment.”

CREA forecasts that national sales activity will rebound in 2012 by three per cent to 453,300 units, which is roughly on par with the 10 year average.

It believes the market will continue to be relatively balanced between sellers, or supply and buyers, or demand, although the supply of new listings of existing homes is expected to trend higher.


General Angela Calla 10 Feb


Many people who would like to own homes have fears that prevent them from buying. If you’re one of these people, take heart – there are simple steps you can take to overcome your fears and become confident that you will make a sound purchase. Here are some of the top reasons you may be holding off on purchasing a home and how to overcome these hurdles. (For related reading, also check out 5 Mistakes Real Estate Investors Should Avoid.)


A Loss in Property ValueHomes can decline in value, even without a disaster. Neighborhoods can gradually decline, newly-built homes can make older neighborhoods less attractive, or an unpleasant development (prison, landfill, highway, etc.) could be built nearby. A poor or mediocre economy can also keep home values down.


Even savvy home buyers can’t always predict what will happen to home prices. But you can take precautions, like buying in a low-crime area where the homes are well-kept, primarily owner-occupied and with high-quality schools nearby. You can buy in an area where there are multiple sources of employment, so if one business shuts down or leaves, the entire town doesn’t have to move to find work. And you can contact the city government to ask about future development plans in the area you want to buy.


  1. Overwhelming Maintenance CostsAll homes have upkeep costs, and many homes have very large maintenance bills. If you become a homeowner, you won’t be able to avoid these costs. However, there are numerous things you can do to mitigate and prepare for them:
    • Buy a home that has been well-maintained.


    • Buy a home that has recently had major components upgraded or replaced (e.g., new roof, new water heater, new plumbing, new electrical)


    • Buy a new home (though new homes sometimes have undiscovered defects).


    • Regularly maintain your home to prevent small problems from becoming major repairs.  

Go into the purchase with a generous emergency fund set aside for home maintenance and add to that fund every month.


To avoid buying a money pit, you should also have a home inspection before you buy. (For more on home maintenance, take a look at Do You Need A Home Inspection?)


  1. Buyer’s RemorseAre you concerned about buying the wrong house? Maybe it’s because you don’t know what you want. Fortunately, you can solve that problem.  

Make a wish list that includes features your home must have, as well as features that you’d like it to have but aren’t necessary. Look at many houses to see what’s available in your price range. If you find a home you think you want to buy, sleep on your decision before making an offer. And don’t exceed your budget, as you will quickly regret buying any house that strains your finances. Also, don’t be afraid to walk away from a house – new homes are always coming on the market.


  1. Being Unable To Afford Your Mortgage PaymentMany people wonder how they will afford their mortgage if they lose their job. They also might see that the mortgage payment required to afford a home in their area exceeds what they currently pay in rent.  

To deal with potential job loss, make sure to have a large emergency fund set aside. You can use this money to continue paying the mortgage if you lose your job. Also, though you may experience unpleasant collection activities, your home isn’t likely to be taken away from you the first time you miss a mortgage payment.


Before you take on a mortgage, set up a budget so you know what your existing expenses are and how much money you take home every month. Also, think about new expenses that will come with home ownership, like water and trash bills. Pay little attention to what your lender thinks you can afford. You may think that your lender is the financial expert, but in actuality, you know more about your finances than anyone else. You can also try making fake mortgage payments for a few months and see how it affects your finances. If a mortgage would cost double what you currently pay in rent, make an extra “rent” payment every month into your savings account. Can you still live comfortably with this extra payment?


 Tricky MortgagesIf you feel that you are not financially sophisticated enough to manage a mortgage, there are two simple remedies to this problem:


    • First, start educating yourself about how mortgages work, and don’t buy a home until you understand what you’re getting into. There are numerous books, articles and classes available on the subject. For more information


    • Second, if you’re still uncertain, geta fixed-rate mortgage. These mortgages have withstood the test of time and are the most basic and most foolproof mortgages available.  

The Bottom LineBuying a home will likely be the largest purchase of your life, so you’re justified to be hesitant. But millions of people, many of them less intelligent than you, have taken the plunge and are successful homeowners. Do your research, make the necessary preparations, and feel confident in purchasing your first home.