Have you ever wondered whether or not you would be able to afford a mortgage payment, on top of other home owning expenses? Do you currently own a home and wonder whether or not you can afford to upgrade? There’s one way to find out: try it without consequence!

Regardless of whether or not you think you can afford a new home, an upgrade, etc, I would always recommend doing this for a few months before making a final decision. Choose a home, and using a mortgage calculator, determine what your monthly costs would be. Add a percentage point to the current rates just to be sure that in five years you will still be able to afford it.

Once you know your monthly mortgage payment, take that number and add 5-10% for maintenance, property taxes, etc. This is your total cost. Subtract your current rent (or mortgage payment) by this number to find the difference you’ll be paying each month.

As an example, say you’re paying $1200 per month in rent, and your dream home, costing you $250 000 at an interest rate of 8%, would cost $1908 monthly over 25 years. Adding 10% for home care and maintenance, your total costs for the new home is $2091 per month. As such, you’re going to be paying $891 more per month.

Now that you’ve got the numbers in order, it’s time to put this into practice: every month, stick $891 in a high-yield savings account. Not only will your savings increase (which you can add to the down payment for your home!) but you’re now living at the level which the house will cost you.

You need to live at this level for at least three months, but by all means keep doing so until you’ve accepted the idea that you will be able to continue living at a comfort level which is acceptable to you. If you find that you can take the change easily then you’re ready to make your purchase. If not, well while you have decisions to make, you at least didn’t make the purchase before discovering this.

Too many people don’t understand the lifestyle changes often associated with a higher mortgage rate. Finding out what it’s like beforehand is a great way to avoid making a major financial mistake.

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