As we’ve previously discussed in more detail, the cost of living has risen dramatically due to a magnitude of factors. We can continue to discuss the cost of living, but I think it’s important we just get to facts that can help you right now.
I know your mortgage payment sucks right now, and I have a personal story to share on this later on.
Canadian banks have started permitting customers to stretch out, or amortize, their payments over much longer periods, some lasting several decades. The goal of this is to help homeowners reduce their monthly mortgage payments after the central bank’s rate-hike campaign that saw the benchmark interest rate spike by 475 basis points in less than 18 months, settling at a 22-year high of 5%.
I WANT TO WARN YOU EXTENDING YOUR AMORTIZATION PERIOD IS A BAND-AID, NOT A SOLUTION TO THE PROBLEM.
The main danger in lengthy amortization periods is that it could lead to greater purchasing power among borrowers – which could then spur them towards more transactions, ultimately making their monthly spending larger.
See, if you just have a 30-year amortization, everyone’s mortgage payments will go down about $200 so they can actually afford the house. But if you’re in a supply-constrained market, like we are, and that’s your solution, it’s not going to solve the problem. This simply makes credit more easily accessible and available, so monthly payments go down, but this actually increases the cost to the homeowner over time due to accrued interest.
One thing is certain, this is the new reality because rates are NOT going back down.
YOU COULD SAVE YOURSELF THOUSANDS OF DOLLARS IN UNNECESSARY INTEREST BY JUST PICKING UP THE PHONE AND GIVING US A CALL.
As I mentioned earlier on, mortgage payments suck right now for everybody. Myself included! In fact, my mortgage was up for renewal recently, and forgetting this impending renewal date, I didn’t remember until I got my renewal notice from the lender. Totally common, but a potentially critical mistake I want to warn you of.
I got my letter in the mail and I was shocked at the numbers I saw. After two failed attempts to get a real human on the phone to speak with me, I had to go into my local branch to push back and get competitive rate offers.
A total of maybe 3 hours and I saved myself close to $10,000 in unnecessary interest payments. I was able to use negotiating power because I am in the industry and know what is competitive, but you probably don’t.
What really pisses me off is that I eat, sleep, and breathe mortgages, and if I didn’t know what I was doing, I could have been forced into paying thousands of dollars more over the term of my mortgage. I would have been taken advantage of because I trusted my bank and signed on the dotted line. Let’s face it, we all need every penny we can get right now. The average person doesn’t know all the nuances and could have easily moved forward with the rates provided, which may not be the best rate you can get.
If you’re coming up on a renewal in the next 6 to 12 months, you need to be proactive and plan ahead. If you know your mortgage payments will go up drastically after locking down a fixed rate during the pandemic, you’re going to face a bit of a shock. But there are steps you can take before your term is up to dramatically decrease your payments moving forward.
- Start to pay lump sums outside of your regular payments while your rates are lower, this can make a huge difference when it comes time to renew and decrease your payments in the future.
- Start to research and educate yourself on your best options and rates, and if you don’t know where to start or what to expect, contact our office to speak with a mortgage professional who can assist.
- Make the necessary adjustments to your lifestyle now so you aren’t paying for it in the future. Budgeting and staying on top of your spending is super crucial right now and could help keep you in your home in the future.
If you want to enjoy your money and stop paying the bank your hard-earned cash, what’s stopping you from picking up the phone and taking action? The WORST that can happen is we confirm that you’re getting a good deal and you’ve done your due diligence in getting a second opinion. You wouldn’t go to your General Practitioner for brain surgery, you’d be sent to a specialist for non-partisan feedback.
If you feel you are unsure what to do next or want a pro bono review of your financial assets and liabilities, reach out and let’s chat – we are here to help!
One phone call, 10 minutes. Get the facts, not the fiction.