I just got a big raise at work, so naturally, I came home and asked my wife if she’d prefer I get a motorcycle or a quad. She has a strong dislike for quads, so her answer was quick: “Motorcycle.” The next day, I put a down payment on a brand-new Ducati. Was she impressed? Not exactly—but that’s a story for another day. When a buddy of mine heard the news, he got caught up in the excitement and put down a deposit on a Ducati too.
A week later, all the paperwork was finalized, and I put on my helmet and rode off into the sunset, living the dream. But where’s the drama, you ask? What’s the bad part of the story? Alright, you win—I’ll break a promise I once made to a friend.
That buddy of mine who impulsively bought the Ducati told me he’d been riding his whole life and that this wouldn’t be his first bike. I knew he was lying when he laid it down before he even made it out of the dealership parking lot. He locked up the front brake on some loose gravel mid-turn, and down he went. On our way to another Ducati dealership, he crashed again—this time in a speed wobble at just 30 km/h. By the time we got to the dealership, he was ordering parts to replace everything he damaged in both accidents.
And if that wasn’t bad enough, he was stopped by the police several times over the next few weeks because of his reckless riding. As it turned out, he didn’t even have a motorcycle license! The rest of his summer was spent either hiding from the police or waiting for someone with a proper license to ride with him.
You can probably see where this is going—biting off more than you can chew often leads to disaster, worry, and anxiety. Now, where can this go wrong for a mortgage holder?
Here’s how:
- Being house-poor with no money left for any fun at all.
- Facing the risk of default and foreclosure.
- Needing to downsize to make ends meet.
- Repossession of other assets if payments aren’t made.
- Sleepless nights, tears, and stress from being overextended.
- Strain on relationships, with the possibility of a spouse leaving.
- And in the most extreme cases, even death.
That’s a scary list, to say the least. I’ve experienced firsthand how the stress of debts and obligations can become so overwhelming that it feels easier to give up than to face the problem. Don’t let it get to that point—ask for help. Get some solid advice.
Recently, I had a couple come to me with well below-average credit. They’d just gotten a big raise and made an offer on a new home. Even before we had financing approval in place, they caved to the pressure from their realtor and their desire for a bigger, more beautiful house. They waived the financing conditions without my written consent and before I had all the necessary documents or had met the bank’s conditions. This is never a good idea and adds so much unnecessary risk.
Yes, I managed to secure their financing, but what if things hadn’t gone as planned?
- What if the appraisal had come back low?
- What if the interest rate wasn’t what they expected?
- What if there were issues with the inspection?
- What if the conditions of the deal couldn’t be met?
- What if they didn’t get what they expected from the sale of their old property?
In their case, the payments weren’t too bad on paper, but when you factored in the property taxes, which they hadn’t accounted for in their budget, affordability became a real concern. They also had to scramble for more down payment because their old house sold for less than expected.
What’s the moral of the story?
When it comes to financing, make sure you have all the costs factored in so there are no surprises. Having a solid plan in place will ensure you stay on track, and focused on paying off your mortgage as quickly as possible while keeping your finances in the black.
Need help? As an Independent Mortgage Broker and team leader, managing and mentoring 13 other brokers, I’m here to provide you with expert advice. Call or text me—I’d be happy to help you get started on the right path.
403-807-8779
By: Michael Richmond Edit August 28th, 2024
