Higher Energy Prices and Your Mortgage

As we look at more record prices for a barrel of oil, we may see impacts which go beyond our gas tanks or our home heating oil bill. We may actually see this put pressure on the prices of homes.

This pressure makes perfect sense. Frankly, sky-high heating prices affects the affordability of homes. If you are looking at a home that burns oil for heat, it might cause you to think twice, especially if it means that you will be straining your finances to pay all your bills in a cold winter. Even if you don't think twice, it could cause your lender to think twice, and this could put serious pressure on prices.

At the moment, most lenders will give you a mortgage based on a percentage of your gross income, and using taxes, an amortized payment schedule and condo fees as applicable. It's quite possible that we will start to see lenders requiring an estimation of heating costs before they agree to lend you the money you need. After all, escalating heating costs affect our ability to pay our mortgages, and lenders are bound to notice that.

In the future, expenses like electricity or even water could be added to the equation for lenders, thus reducing borrowing power even further. Smaller available mortgages would mean less house or a less desirable area for you as the buyer, unless energy-efficient home design become more popular and available. Such designs could actually get you more borrowing power.

Seems there are good reasons to go "green", and not all of them involve the environment. Some involve your pocket book.

Michael

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