Continued excessive household debt may trigger the Bank of Canada to further tighten Canadian mortgage rules, but what can you do to take control and contain your family’s vulnerability?
It is important to structure your mortgage to moderate debt accumulation and ensure that you are securing your cash flow and managing your bottom line:
1. Avoid interest-only Line of Credit type mortgages
Opt for (blended) principal and interest payments to ensure regular principal repayment that creates wealth. Mortgages registered on title as a “collateral charge” have limitations that will cost you money. Buyer beware, these mortgage vehicles are not as flexible as presented. Be selective with the HELOC (Home Equity Line of Credit) product options; don’t be quick to register more than you need!
2. Don’t accept automated qualification
Number crunching requires due diligence and should consider your comfort level and all elements of your personal scenario, including your existing credit status. Perhaps you need to qualify on one income? Ensure that you speak to a license mortgage professional to examine your current financial situation and make sure that you get the best products, rates and strategy to pay down your mortgage faster.
3. Budget for your mortgage renewal at the pre approval stage:
It is a good strategy to budget beyond the initial mortgage term to ensure you can manage projected mortgage debt five years down the road. Can you carry the mortgage balance at an interest rate in excess of 5%?
Whether you are purchasing a home or renewing an existing mortgage, your mortgage agent can help determine your family’s true affordability and structure your mortgage accordingly. Take control today; don’t wait until your debt controls you!
Diane Alvernaz
Mortgage Broker