UTILITY BILLS AND MORTGAGES
Ontarians enjoy, amongst many other benefits, the highest electricity bills in Canada. Today we heard that we can brace ourselves for an increase of 40% in natural gas costs as well as a further $17.00 per month charge to the gas company.
Did anyone ask themselves what the variable costs are that justify the increased charges? Natural gas is a pressurized bubble underground – once the piping infrastructure is in place gas travels along the pipe to containment tanks and out through further piping to the consumer.
Aside from the obvious grumble that will be echoed around the province for a few weeks what is the impact on mortgages and financing? Well some bank debt service ratios include “heating costs”. These debt service ratios are used to qualify consumers for mortgages.
A monthly heating bill of $200.00 would become $297.00 adding an extra $1,164.00 a year to the costs and requiring that you earn an additional $2,771.00 a year in order to qualify for the same mortgage (assuming a GDS ratio of 42%).
Although lenders keep increasing TDS and GDS ratios to facilitate more (higher risk) mortgage lending consumers should beware! Yes, we would all like to live a huge house with all the amenities but just because the lenders say we can afford it can we really?
Take a close look at your budget make sure it is balancing and that you have your own “risk buffer” built in before you sign up for something you may later regret. If you are unsure of how to budget give our office a call – we’ll be happy to help you review a budget and we’ll even give you a free, no obligation CD budgeting tool to help you along.