Locking in to a mortgage is a tempting commitment since current interest rates are at an all-time low. However, experts caution homeowners: Can you still afford your mortgage if the rates are to rise?
Stress-testing your mortgage is a smart way for home buyers to prepare for the future in the event that mortgage rates do increase. Before locking in to your mortgage, home owners are advised to calculate their mortgage payments at a higher interest rate to see how much they would pay if the rates were to increase in the future.
When stress testing your mortgage you should test 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.
Stress-testing your mortgage shouldn't be just limited to first-time home buyers. Current home owner's who are looking to renew their mortgages could benefit for this exercise as well. You cannot predict the future of mortgage rates, however you can try to prepare for it.
Mortgage specialists are well versed in the financial implications that are associated with home ownership and can help you stress-test your mortgage as well as help you find ways to pay down your mortgage faster.