How Much Mortgage Can I Afford?

Due to the economic crisis and mortgage crisis that swept the United States, not to mention the fact that many people have been concerned about a housing bubble bursting here in Canada. One of the policies that came out of the situation was that the maximum mortgage length was dropped from 35 to 30 years, and then to 25 years.

Even without that change, it still makes sense to think that you might be asking how much mortgage can I afford? When you look at the situation in terms of monthly cash flow, this makes a big difference. As you start thinking about the type of home you want to buy, make sure that you pay attention to the monthly payment, and how it fits into your regular budget.





For most people, the difference in the maximum amortization length shouldn’t be a deal breaker. However, it does force people to pay off their houses sooner. On top of that, it also means that some buyers not might be able to get the same size mortgage. While most buyers will still be able to get a home, though, some fringe buyers will be forced out of the market, since this will increase their debt service ratio and could be the difference between qualifying for the mortgage or not.

If you think that you might not be able to afford a mortgage with a shorter amortization schedule, you should consider some of the options out there designed to help you boost your ability to afford a mortgage:

Home Buyers Plan

One way to make your home more affordable is through the Home Buyers’ Plan, which allows you to borrow $25,000 from your RRSP to put towards your down payment. Your spouse can withdraw $25,000 from his or her RRSP as well. So if you both have saved up enough in your RRSPs, this can be a great way to come up with $50,000 to add to your down payment and reduce your mortgage.

This is a nice bonus, since you wouldn’t normally be able to take money out of your RRSP before retirement. But this is a viable option. When you make a bigger down payment, you reduce the amount that you borrow, also reducing the amount of the monthly payment. It’s a good way to use your assets to purchase a home that is more affordable.

TFSA

Another great way to save up a down payment is to use your TFSA, which now provides $31,000 in contribution room if you were at least 18 in 2009, $62,000 if you have a spouse, that’s also saving up towards your new house. The TFSA is great, since you can take advantage of tax-free growth, and you don’t have to worry about penalties.

Figuring Out How Much You Can Afford

You also need to know how much mortgage you can afford before you raid your registered account for a down payment. There are different rules of thumb that can help you figure out how much home you can afford. Some suggested that you should limit your mortgage payment to 30% of your monthly income.

While the 30% rule can be a good start, the reality is that you need to consider what makes you comfortable. Look at your situation. Consider how much debt you already have. If you have a lot of debt, you need to keep your mortgage payment low. Additionally, you should also consider what might happen if you lose some of your income. You don’t want to have a mortgage payment that is so high that you are worried about defaulting if something goes wrong.

The mortgage rules that the CMHC announced a few years ago will certainly make it more difficult for some to get a mortgage. However, that doesn’t mean that you don’t have a chance at a mortgage. If you put together a decent down payment with one (or both) of the ideas above, and if you can be realistic about how much house you really need to buy, you can qualify for a mortgage and pay it off sooner!

source: canadianfinanceblog.com

Obama warns Wall Street over fiscal crisis

WASHINGTON - President Barack Obama sent Wall Street a blunt warning Wednesday that it should be very worried about a political crisis that has shut down the government and could trigger a US debt default.

Obama said he was "exasperated" by the budget impasse in Congress, in an interview with CNBC apparently designed to pressure Republicans by targeting the financial community moments after markets closed.
 




The president then met Republican and Democratic leaders for their first talks since the US government money's ran out and it slumped into a shutdown now well into its second day.

But few informed observers held out much hope for a sudden breakthrough.

Obama was asked in the interview whether Washington was simply gripped by just the latest in a series of political and fiscal crises which reliably get solved at the last minute.

In unusually frank comments on issues that could sway markets, Obama warned that investors should be worried.

"This time's different. I think they should be concerned," Obama said, in comments which may roil global markets.

"When you have a situation in which a faction is willing potentially to default on US government obligations, then we are in trouble," Obama said.

Obama said he would not negotiate with Republicans on budget matters until House lawmakers pass a temporary financing bill to reopen federal operations and raised the $16.7-trillion debt ceiling.

If the borrowing limit is not lifted by the middle of the month, the US government could default on its debts for the first time in history.

"If and when ... that vote takes place and the government reopens, and if and when they vote to make sure Congress pays our bills on time so America does not default on costs it's already accrued, then I am prepared to have a reasonable, civil negotiation around a whole slew of issues," Obama said.

The president said he had "bent over backwards" to accommodate Republicans -- a statement his foes would dispute -- but warned it would set a terrible precedent to allow lawmakers of any party to hold a White House to ransom over raising the debt ceiling.

Exasperated

"Absolutely I am exasperated, because this is entirely unnecessary," Obama said.

The government shutdown has sent 800,000 federal workers home, closed museums, national parks and monuments and crippled government services.

Obama wants a straightforward temporary spending bill to end the first shutdown in 17 years, while Tea Party Republicans have repeatedly tied the measure to a dismantling or delay of his signature health care law.

With neither side willing to budge, hopes of an early exit to the shutdown are fading.

"Most of the time you can see an end game," Republican Senator Johnny Isakson told MSNBC. "Right now there's no end game in sight."

Some signs of incremental movement emerged, with Democrats pledging to appoint negotiators to thrash out a long-term budget -- provided that the Republicans agree to an immediate six-week federal spending measure with no anti-Obamacare provisions.

Obama met at the White House with his chief political rival, House Speaker John Boehner, as well as top Senate Republican Mitch McConnell to address the standoff.

Senate Majority Leader Harry Reid and top House Democrat Nancy Pelosi were also there.

Boehner's office said the fact the talks were taking place was a victory in itself and had the potential to lead to "serious talks between the two parties."

A risk if protracted

European Central Bank chief Mario Draghi warned Wednesday that a US shutdown "is a risk if it is protracted."

"It would be a risk not only for the US, but also the world economy," Draghi said.

Obama on Wednesday gathered a group of high flying CEOs, apparently hoping they would pressure Boehner to pass a straight temporary funding bill.

Goldman Sachs boss Lloyd Blankfein warned that America was getting onto dangerous ground by flirting with not raising the debt ceiling. A previous period of brinkmanship on the issue badly hit the US credit rating.

"There's a precedent for a government shutdown, there's no precedent for a default," he said after meeting Obama.

Furious tourists meanwhile are locked out of Washington museums and monuments, as well as national parks and landmarks like the Statue of Liberty in New York. Cancer research and treatment at the world-class National Institutes of Health has ground to a halt.

The fallout has already caused Obama to shorten his long-planned Asia trip, scrapping stops in Malaysia and the Philippines that were due to begin this weekend, so he could attend to the crisis at home.

The president's attendance at regional summits in Indonesia and Brunei was also in doubt.

A no show in Asia would be seen as a blow to Obama's policy of rebalancing US diplomacy and military might towards the fast growing region.

But James Clapper, Director of National Intelligence warned lawmakers that US security was already being compromised.

Seventy percent of the intelligence workforce had been furloughed, potentially offering an opening to foreign recruiters in the field, Clapper said.

"This seriously damages our ability to protect the safety and security of this nation," Clapper said.

source: interaksyon.com