Many "experts" say that it is best financially to hold the highest affordable mortgage you can. They throw around "tax-deductible" and "low-interest," but owing all you can isn't necessarily right for everyone.

Most people know what they can and can't afford. Look at your situation. If you are spending $1,000 a month on your current rent or mortgage, but still broke all of the time, you know you can't afford that $2,200 a month payment that your lender is talking you into.

Let's look at a couple of examples.

Travis is married and has three small children. He has a nice job with little overtime and spends most of his free time at home. His wife is a stay-at-home mother and they enjoy their time together with the kids in the backyard.

Sarah is single and lives in a large city. She travels a lot and isn't home very often. She has a hectic social life, eats out every meal and has a fast paced career.

Both Travis and Sarah earn the same amount of money and have the same amount of debt. But should they spend the same amount of money on their mortgage payment? A lender would say yes based on their number, but I say no.

George is the best candidate for a larger mortgage payment. He needs a larger home to accommodate his family. He has few outside expenses. On the other hand, Maria lives an expensive lifestyle. Personally, she doesn't need a large mortgage. She probably couldn't afford it.

So how do you know what you can afford? You have to base your mortgage payment on your own objectives and lifestyles. You have to know your own comfort level. You must know the difference between what you can borrow and what you can afford. For example, you could borrow tens of thousands of dollars in credit card debt, but you can't afford to pay it back. It's kind of the same on a larger scale.

When you are looking at moving up in mortgage payment, you have to already have that extra money in your budget, or be willing to give up something for it. We recently bought a new home double the value of our old home, with double the mortgage. We have less free money, but we can afford it. You have to look at what you can afford, not what someone tells you is affordable.

You have to remember that there are added costs to owning a home or buying a larger home. Maintenance, property taxes, homeowner's insurance -- it all goes up. You will need to have more money saved for closing costs and for a down payment.

Look at what you want. Do not take out an excessive mortgage because interest rates are low and you get a tax deduction. These are great benefits, but not what makes a mortgage work. You need to determine on what level you can afford to be at.

See, the lender isn't looking at what you can afford. The lender is only concerned with you making the payments. The most important thing is to make sure that your housing budget will fit into your particular lifestyle and financial situation.

Copyright 2006 #1 Loans USA

About the author:

Martin Lukac, represents #1 Loans USA http://www.1loansusa.com a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. For daily mortgage rates please visit http://www.RateEmpire.com