Homeowners in Canada are likely to be feeling the squeeze lately.
While the price of a home in Canada is expected to correct soon, recent interest rate hikes have made some homeowners worried that they will have to sell their homes if rates were to go up anymore.
And, although it's tough out there, RATESDOTCA expert and licensed mortgage agent Sung Lee,, has put together some tips for anyone with a mortgage looking to save some cash.
One of the first pieces of advice Lee has is for homeowners is to look at changing their amortization — also known as the duration of your mortgage.
This means temporarily increasing the length of your mortgage so that your monthly payments can go down.
Of course, extending your mortgage does end up costing you more in the long run, as you will pay more in interest over time.
That's why it's recommended you only adjust your rate for a short while. Once you're in a better financial position, you should go back to a shorter amortization.
The next tip is for any homeowners who might have a home equity line of credit (HELOC) loan, which is a loan that uses the value of your house as equity.
Lee suggests that those stressed out about monthly payments should see about consolidating any high-interest debt payments they might have into their HELOC. This is because HELOCs typically have a lower interest rate than other debts out there.
What makes this even better for short-term help is that payments on a HELOC can be interest-only, which means smaller monthly payments.
But, you should be careful with this option. To avoid just paying interest forever, make sure you figure out a way to also pay down the principal amount.
Along these same lines, Lee suggests you could also refinance as a means of consolidating your debt to get some help.
While this could mean paying a higher rate for an uninsured mortgage, if you have outstanding high-interest debt it could be worth it to merge everything together. The benefit is that it could give you a lower overall interest rate on all your monthly debt payments.
And finally, Lee also suggests looking into a variable rate mortgage. While this is a case-by-case option, it could mean more cash in your hands in the long run.
For context, a variable rate mortgage has a rate that fluctuates along with the prime interest rate set by the Bank of Canada.
And, while their interest rate can be high or low depending on the economy, a variable rate's initial payments are actually less than a fixed-rate mortgage — a loan with a rate that doesn't change — which means more cash in your pocket for the here and now.
Lee concludes by saying that, before you think about selling your home because of high payments, you should consult with your mortgage broker. They can help you out and find other options that don't require you to give up your house.
For those looking for a more affordable home, there are tons of places in Canada where you can actually buy a property for under $200,000. However, you just might have to sacrifice a big city life!
This article’s cover image was used for illustrative purposes only.
Here's How To Save On Your Mortgage In Canada If You've Been Impacted By Interest Rate Hikes
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