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Car Payments and Mortgages: The Great Canadian Tug-of-War

Hello, fellow Canadians! Ready to dive into the wild world of car payments, leases, and mortgages? Buckle up! It’s going to be a fun ride, and don’t worry, we won’t make any sudden stops.


So, you’ve got your eye on that dream home in the future, the one with the perfect view of the Rockies or a charming spot near the Great Lakes. But wait – there’s a little hitch. Remember that sleek car you’re cruising around in or that awesome truck to go 4x4ing in? Yup, the one with the monthly payment that makes you feel like you’re secretly funding a small country's GDP? That might just throw a wrench into your home-buying plans.


The Mortgage Maze


First things first, let’s break down how mortgages work in Canada. The banks want to make sure you’re not biting off more than you can chew. They’ll look at your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios.

Sounds fancy, right?

It’s just a way of saying they want to see if you can handle all your debt (including that car payment) and still have some loonies and toonies left for maple syrup and hockey tickets.


The Car Payment Conundrum

Here’s where it gets tricky. That shiny car with its dazzling features doesn’t come cheap. Whether you’re making car payments or leasing, that monthly expense is part of your debt. And guess what? It gets included in those GDS and TDS calculations.


Imagine this: Your monthly income is a delicious pie. The bank wants to make sure you’re not giving away too many slices to your car payments, leaving just crumbs for your mortgage. They prefer it if you save the biggest piece for your future home – the place where you’ll binge-watch hockey games and practice your “ehs.”


The Leasing Loop

Leasing might seem like a sneaky way out, but not so fast! Leases might have lower monthly payments compared to buying, but they’re still a regular expense and they show up on your credit report. And here’s the kicker – some lenders even look at the total lease obligation, which means they consider the entire cost of the lease rather than just the monthly payment. It’s like they’re saying, “Nice try, but we’ve got our eyes on you!”


The Balancing Act

So, what’s a hopeful homeowner to do? Here are a few tips to navigate this tug-of-war:


1. **Check Your Ratios**: Before applying for a mortgage, take a peek at your GDS and TDS ratios. There are plenty of online calculators that can help you figure out if you’re in the safe zone or call me and I can do that for you.


2. **Reduce Debt**: If possible, pay down some of that car loan or other debts. It’s like clearing the clutter before having guests over – it just makes everything look better.


3. **Increase Income**: Easier said than done, right? But hey, if there’s a chance to boost your income, even temporarily, it can help tilt the scales in your favor.


4. **Talk to a Mortgage Professional - like ME**: We are the superheroes of the finance world. I can help you understand your options and find a mortgage that fits your unique situation.


5. ***If you own a company or are self employed, have your payments come out of your BUSINESS account. We can remove them from your liabilities.


The Grand Finale

In the end, it’s all about balance. Your car is your trusty steed, taking you on adventures and making commutes bearable. Your future home? That’s your castle, your cozy retreat.


With a bit of planning and some savvy financial moves, you can have both without feeling like you’re juggling flaming torches.


So, keep those car payments in check, watch your debt ratios, and soon enough, you’ll be kicking back in your new home, knowing you’ve conquered the great Canadian car payment vs. mortgage showdown. Cheers to that, eh? 🏠🚗🍁


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Hope you enjoyed this little adventure through the financial wilderness! Have questions or your own mortgage tales to share? Drop a comment below – let’s keep the conversation rolling!



Car payments and your mortgage
Car payments and your mortgage



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