The “7 second” rule is one of those handy tips to help curb impulse buying. Basically, when you are considering a purchase, pause for 7 seconds while asking yourself, “Do I really need to buy this thing?” Hopefully you’ll overcome your impulsive urge to buy and calmly walk away, or consider a less expensive option.

We all like to think that we are rational people who make decisions based on fact, but studies show that we are more often swayed by our emotions and can get caught up in market highs and lows. Take investing in the stock market. We all know the saying “buy low and sell high” but very few people can follow it since it can run counter to what we feel. “I don’t want to buy a stock that is going down in price/value…I’ll lose money.”

The same can be said for Canada’s current ‘hot’ housing market. With historically low rates, many Canadians are keen to refinance or buy a home as soon as possible. This in turn creates irrational behaviour – bidding wars, purchase conditions being waived, houses selling for 10 to 20% over the asking price. Some could call these signs of a bubble, but for me the more troubling aspect is the position many of these new homeowners could find themselves in a few years from now.

When you sit down to find out how much ‘house’ you can afford to buy based on your current income and the expected monthly payment, I recommend you try a different “7 second” rule.

Take that mortgage amount and create 3 other amortization schedules with higher rates. For example, a $300,000 mortgage with a 5 Year Fixed rate of 4.09% amortized over 25 years will have a monthly payment of $1,592. You may think that this is something you can afford. Now raise the rate by 1% to 5.09%, then 6.09% and finally to 7.09% (this should take about 7seconds if you use an online mortgage calculator – give or take a few minutes).

This will give you some perspective of what kind of payment you might be making if the rates go up in the not too distant future.

Think carefully about how affordable the home you buy today will be five years from now. You might want to consider buying less home so that your mortgage is smaller. Stay away from any amortization longer than 25 years so that you can pay down more of the principle and interest. You don’t need to be an expert in how amortizations work because these are so easy to find online but they will really help you understand what you will really be paying while you live in that home.

I know it’s hard to consider all this when that real estate agent finds you the home of your dreams – but those extra 7seconds could help to keep it a dream home and not a nightmare years from now.