The Buying Series Part 3 – To stretch your budget… or not

When you’re in the market for a new home in Calgary, it’s essential to consider your budget carefully. While it may be tempting to exceed your budget to get everything you want, there are still plenty of good reasons to stretch it slightly.

By stretching your budget, you may be able to find a home that better meets your needs and desires. For example, you might be able to find a property that has the extra bedroom or larger yard that you’ve been looking for. It’s all about finding a balance between your budget and your must-haves.

At the same time, it’s essential to remember that there’s a limit to how much you can stretch your budget without risking financial strain. That’s why we always recommend taking a conservative approach and not exceeding your budget beyond what is realistic.

By staying within your budget, you’ll be able to enjoy the peace of mind that comes with knowing that you can comfortably afford your monthly mortgage payments. You won’t have to worry about the stress of struggling to make ends meet, and you’ll be able to enjoy your new home without financial worries hanging over your head.

A story from Dennis:

I really wish my wife and I had stretched our budget on our first home. We were pre-approved for a mortgage between $200,000 and $250,000. We went for the lower end because we didn’t like the sound of spending another $50,000. Except, we hadn’t considered the reality that spending another $50,000 on our mortgage only increased our monthly payment a couple of hundred dollars a month.

Let’s crunch some numbers. These aren’t the exact figures we were faced with at the time, but they’re still instructive. Using the CMHC online mortgage payment calculator, a $200,000 mortgage at 4.64% interest, amortized over 25 years (the longest amortization period allowed in Canada at the time) requires a monthly payment of $1,122.56. A $250,000 mortgage with the same interest rate and amortization period requires a monthly payment of $1,403.21. That difference of $280 per month is the kind of number that can be considered in a budget, whereas $50,000 is too big for a lot of us to think about.

In our situation, the difference between the low end and high end of our mortgage was around $150 a month—well within our ability to pay. A larger mortgage would have opened up more options for us. With that bigger budget, we probably would’ve bought into a neighbourhood closer to our friends (nobody wanted to come to our far-off suburb to visit us) and we could’ve avoided all the other headaches that came with buying that foreclosure. 

So, if you’re looking for a new home in Calgary, don’t be afraid to stretch your budget slightly to get the features and amenities you need. But remember to do so responsibly and with a realistic approach, so you can enjoy your new home with confidence and peace of mind.