With interest rates at an all-time low, locking into a mortgage is a tempting commitment. However, these low rates have experts cautioning homeowners: can you still afford your mortgage if rates were to rise?
Stress-testing your mortgage is a smart way for home buyers to prepare for the future in the event that rates go up. Before locking in to a mortgage, home owners would calculate their payments at a higher rate to see how much their mortgage may cost in the event rates were to rise in the future.
Experts offer the following tips to help homeowners:
Test at 1% to 2% higher than your current rate:
Financial advisors recommend stress testing your mortgage at 1% to 2% higher than your current rate. Many financial institutions offer online mortgage calculators that are designed to help calculate your mortgage at different rates.
Not just for first-time homeowners:
Stress-testing your mortgage isn't just limited to first-time homebuyers. Current homeowners who are looking to renew can benefit from this exercise too.
Double-check your results with a mortgage specialist:
Mortgage specialists are well versed in the financial implications associated with home ownership and can help you both stress-test your mortgage and also help find ways to pay it down faster.
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