Historically low interest rates are making it easier for Canadians to enter the real estate market. Why continue to rent when a mortgage payment could be less than your current monthly lease? If you’re considering the here and now, buying makes perfect sense. With the help of a seasoned mortgage broker, you can easily secure a best rate mortgage that’s cost-effective – but what happens when the market shifts and interest rates begin to rise?
Whether you’re a first time buyer or a seasoned real estate investor, it’s important that you understand the various factors that contribute to the longterm affordability of a home purchase. Just because your rate looks great now, doesn’t mean it’s guaranteed to stay that way forever. When searching for the best mortgage rate, it’s important that you are comfortable with your payment rate both today and in the future.
Manage Your Mortgage Smarter
Don’t let low mortgage rates dupe you into a foolish decision. The following are three tips to help home buyers and owners benefit from low rates without hampering future financial plans.
1) Pay Down Your Mortgage Debt Faster
It doesn’t matter if you scored an amazing mortgage rate, your end goal should still be to pay it off as quickly as possible. To do this, consider setting the mortgage payments higher than required. This can be arranged through your lender’s privilege payment options. These options include:
- A lump sum payment
- Increasing your scheduled mortgage payments by a set percentage
Not only will this help you pay off your mortgage debt faster, but it will also condition you to adjust your budget. This way, when it comes time to renew your mortgage, you won’t feel the crunch of an increased interest rate. You’re budget will already be suited to the higher payments, thereby making your mortgage more comfortable and manageable over the longterm.
2) Plan for the Future
Before you lock in your best rate mortgage, take the time to work out some potential future scenarios with your mortgage broker. Use an online mortgage calculator to compare a number of different mortgage options. Base one calculation on today’s interest rates. But don’t stop there. Work with your broker to test out potential future rates. Increase the interest cost by 3 or more percent – can you still manage to make your mortgage payments? This exercise will help you understand how much wiggle room you’ll need in your budget in order to handle an interest hike.
3) Consider a Longer Term
Mortgage rates are going to go up – there’s no denying that. So, instead of risking a costly renewal, consider locking in your current best rate mortgage for longer. This is especially good advice for homeowners who are entering into a new life phase (i.e. approaching retirement or entering post secondary education). Locking your rate in for a longer period of time will provide you with the stability you need to build (and stick to) a rock-steady budget. If you’re thinking about locking in your current best rate mortgage, do a little research first. Take the time to explore what flexibility you have, if for some reason you do need to make a change earlier than anticipated. Knowing your options ahead of time will make it easier to prepare for the unexpected.
Taking advantage of the best mortgage rate is smart, but only if you’re aware of how your affordability factors can change down the line. Take the time to research and plan today in order to ensure a financially secure tomorrow.