“Pay Down Your Debts Before Rates Rise” is an April 2012 article from The Globe And Mail providing 10 great reasons for Canadians to start paying down their debts.
The ten reasons from the article are below – where we’ll also elaborate on some of the points further.
1. Rates will eventually rise – it’s inevitable…
Globe And Mail author Rob Carrick presents a good point here; mortgage rates will not be at historical lows forever. It would take a crystal ball to determine exactly where and when mortgage rates will rise – but we know this much; mortgage rates will indeed rise again. Take this opportunity to get rid of your mortgage & line of credit debts at today’s low interest rates.
2. Borrowing means you can’t afford the stuff you’re buying…
Again a good point – resist the temptation to use that line of credit as a proverbial ‘ATM Machine’.
3. Cutting debt gives you a buzz….
Being debt free is certainly one of those fulfilling feelings. The accomplishment of paying off those student debts, or your go-to car can be freeing.
This point usually leads into a more interesting discussion – which debts to pay first?
From a financial perspective, it is always best to tackle the debt with the greatest interest rate; however, some advocate taking care of the smaller, more easily dismiss-able amounts so you can see the results of paying off your debt quickly.
The Anonymous Monster would always suggest paying off the debt with the higher interest – but can see the value in the alternative option. Sometimes easing the smaller debts off of your back provides the motivation needed to start taking down those larger debts. Get addicted to being debt free.
4. Less stress…
The worries associated with debt are very real – and Canadians certainly feel the strain. The stress from debts can of course impact not only your financial well-being, but your mental and possibly physical well-being too. While a luxurious trip to an exotic country can melt away the stress for a few weeks – the benefits of contributing extra money towards being debt-free sooner can also help to make things a little brighter at home.
5. Your next mortgage renewal could be scary…
MonsterMortgage.ca has approached this topic before – for Canadians who secured mortgages in the low rate environment may not be prepared to face interest rates of 5% or 6% when it comes to their renewal in 3, 4 or 5 years’ time.
MonsterMortgage.ca has previously espoused the benefits of the 10 Year Fixed Rate Mortgage (at the April 2012 rate of 3.89%) and how conceding a slightly higher 10 year rate in today’s environment can pay dividends down the line. While this strategy might not be for everyone – there are a number of MonsterMortgage.ca clients whose 10 year fixed mortgages will be their last mortgage.
6. Your kids need help affording university…
Another topic that MonsterMortgage.ca has touched upon in the past is realizing the benefits of the RESP. After all, as the Globe And Mail writer states, in order to contribute to an RESP, you’ll need free cash flow. To get free cash flow, you’ll have to start zoning in on those debts.
7.You get more control over when you retire…
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8. You won’t retire with debt…
Bingo.
9. You’re covered for emergencies…
You’ll never know when such emergencies will strike. As Rob Carrick suggests, as soon as your debts are paid off, you can then start to build that ever-so-critical ‘Rainy Day Fund’.
10. There’s no down side…
A great tidbit to take from the article…. “No one has ever told [Carrick]: ‘I really regret paying off my debts’.”
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If you’ve got your own reasons to pay down debt, feel free to leave the best ones below in the comments box.
In the case that you’ve got some questions about how you can further pay down your mortgage debt or what kinds of options you might have in today’s markets; send an e-mail to us at: Info@MonsterMortgage.ca
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