Is Your Mortgage Debt Weighing You Down?May 29, 2018
Canadian parents are carrying the heaviest consumer debt. They’re also covering a growing list of expenses: including childcare costs, lingering student loans and the most mortgage debt of any demographic.
As interest rates creep higher, these financial burdens can become much more difficult to bear, which is why it’s important to be prepared.
What to know before you borrow
In this podcast episode, we talked to our LITs about what advice they would offer parents in their 30s and 40s who are carrying a heavy mortgage, but also have renovation goals. Here’s what they had to say:
- First, look at your current mortgage terms. How have interest rates affected your mortgage payments? When will it be time to renew your mortgage?
- When it’s time to renew, refinance or buy a new home, will you pass the new mortgage stress test? The stress test was put in place January 1st of this year and it measures how well individuals can manage mortgage payments if interest rates were to rise significantly.
Based on the results, you may not qualify for the same amount as you previously would have, or be able to borrow against your home’s equity at the same amount.
- Is borrowing for a renovation a good idea if you’re already feeling pressed? How are you managing your current debt load? It might be a good idea to look into your debt options instead of borrowing more for a renovation.
Save up the required amount by carefully budgeting and setting goals so you can pay for your reno in cash. Use this calculator to see which debt relief options may help you get on track.
Save for now while planning for the future
When you’re covering many financial obligations, following a budget is a necessity. Follow a comprehensive budget that helps you manage your current finances while also allowing you to save up for future expenses. If a renovation is a goal, work it into your budget and tuck away some money each month. If you must borrow some money to complete the job, make sure you’ve set a detailed budget beforehand so you don’t overspend.