Own a home? Here’s how to tackle soaring interest rates, monthly mortgage payments

More and more homeowners are feeling the financial squeeze as interest rates rise, and some mortgage professionals predict the Bank of Canada will raise them further this September.

“We’re listening from 75 basis points to a whole percent,” Angela Calla, a mortgage specialist based in Port Coquitlam, told Global News.

For Canadians who are fixed-rate and awaiting mortgage renewal, it could mean a major sticker shock with higher monthly payments, he said.

“People are going from flat rates of two percent to four and five percent high, so with a $ 500,000 mortgage you can see an increase in payment of $ 500 a month,” he explained.

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This increase, coupled with high food and gas prices, can make the cost of living even more difficult.

Calla suggested having a mortgage strategy in place to alleviate financial stress.

“Don’t wait for the renewal date. Get a hold of the rate now, “she advised.

“Talk to an independent professional who can look into all your options because you may want to extend your amortization if your new payment increases don’t fit into your budget.”

Those homeowners who have a floating rate and are considering locking in a fixed rate need to assess their risk tolerance, Calla added.

“If you are on an adjustable rate mortgage you should review the discount you have. You should review your financial plan if you are planning to move or make lifestyle changes in the next five years and you should understand what a fixed rate option is today. “

With mortgage rates on the rise, credit counseling experts also say it’s a good time to try and reduce non-mortgage debt.

“It’s about trying to calm the waters and look at the whole financial picture. Look at all the opportunities to manage and change some things, ”advised Scott Hannah, president and CEO of the nonprofit Credit Counseling Society.

“We advocate changing your expenses, but not drastically changing your expenses.”

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Hannah said it means looking at the expenses you have today along with the debt you are carrying.

“Is Credit Card Debt Expensive? Could we consolidate that debt at a lower rate? A lower monthly payment? We recommend doing this only once you have your monthly spending under control first ”.

Calla is also reminding homeowners to make it a habit to review their mortgage annually.

“You don’t have to wait for the renewal date if there’s a better mortgage strategy available to you,” he said. “Just as Canadians pay taxes every year, their mortgage should be part of their financial plan which is being reviewed.”

© 2022 Global News, a division of Corus Entertainment Inc.


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