On Wednesday, the Bank of Canada again raised its key rate , which is now at 5%. Here are some ideas to put in place to help you keep your head above water in the face of rising interest rates.
Don't wait to ask for help
“As soon as we feel that we are starting to feel a little tighter or that we are wondering about our finances, call your mortgage broker right away,” suggests Véronique Caron, mortgage broker at Multi-Prêts.
She points out that mortgage brokers take their clients' entire budget into account to offer them tailor-made strategies, but that you shouldn't wait until it's “one to midnight”.
Consolidate your debts and integrate them into your mortgage loan
Consumer debt often carries higher interest rates than the mortgage rate. It is possible to integrate debts into the mortgage loan to amortize them over a longer period and take advantage of a more favorable interest rate in order to reduce monthly payments.
“Consolidating debt through a mortgage loan is not a stain on the client's credit. […] On the contrary, it will improve his credit score,” says Ms. Caron .
Consider converting to a fixed rate loan, in some cases
If you currently have a variable rate mortgage, should you convert it to a fixed rate mortgage? The answer is nuanced.
“It's inexpensive to do that,” says Ms. Caron . When you have a variable rate, generally speaking, the penalty is three months of interest. That said, she points out that this strategy is not right for everyone and that it should be adapted to each person's situation.
An opinion shared by Damien Charbonneau, co-founder and chief operating officer of Nesto, a mortgage loan firm. “If you're still able to pay your variable rate mortgage and live with a little bit of uncertainty, keep the variable rate. But if you are at your absolute limit and if rates continue to rise you would be in a very difficult situation, you can consider the option of transferring to a fixed rate,” he explains.
Extend the amortization period
Typically, new buyers have an amortization period of 25 to 30 years, depending on the amount of their down payment.
Note that most first-time buyers have a down payment of less than 20%, and their mortgage, insured by Canada Mortgage and Housing Corporation, has a maximum amortization period of 25 years.
If you are still able to request an extension, it is possible to do so when renewing your loan in order to reduce monthly payments.
If you do it with the same lender, you have "the opportunity to avoid the penalty in part or in whole, at the discretion of the lender," says Mr. Charbonneau. In the long run, you'll pay more interest, but you could always adjust your amortization down later.
Shop around with your lender for renewal
“At the end of each term, the owner has the opportunity to shop around and change lenders without penalty,” recalls Mr. Charbonneau.
The vast majority of people choose the same lender out of convenience, he notes. “But in the current context, with the rates which have increased enormously, it will really be worth investing the time. Invest time to learn about your options. »
It is not without effort, of course. “Transferring from one lender to another will require you to apply for a mortgage, provide up-to-date documents… But it can really be worth it,” points out Mr. Charbonneau.
Véronique Caron agrees and suggests looking beyond rates: “The choice of bank will be even more important. She insists that her clients are not captive to their financial institution. Things to watch out for: the monthly fees charged by some banks for a bank account or a home equity line of credit, whether it is used or not.
Other bulk ideas
Easier said than done: getting your budget in order and getting rid of non-essential expenses can help free up some wiggle room.
Also, if you're about to go on vacation this summer, plan your spending so you don't get caught off guard and sink into debt — which will only add further pressure to your existing mortgage.
Or, if you have a room available in your property, hosting a roommate could take some of the mortgage financial burden off you.
Source : Article by Clémence Pavic on the ledevoir.com on the 12th july of 2023
Link : https://www.ledevoir.com/economie/794473/nos-conseils-pour-surmonter-la-hausse-des-taux-d-interet
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