- 2015 Federal Election
Of Prime Interest: Get your financial house in order before interest rates start to rise
There is an old adage—‘Don’t wait for spring, do it now’—that is applicable to the current status of mortgage interest rates.
Canadians are being warned time and time again by the Bank of Canada to put our financial houses in order.
If you have credit card debt or other high interest loans combined with a high level of equity in your house, then you need to get your fiscal situation in order by getting your credit payments to a liveable level—and toss the credit cards.
Refinancing $40,000 of consumer debt could drop your payments by as much as $1,000/month.
Canadians would be wise to take proactive steps to anticipate and prepare for a crisis that is headed for Canada.
The best thing all of us can do is go back to the basics of prudence and financial management. While recessions come and go, it is the weak fiscal hands that get into trouble.
Here is a checklist to help avoid financial troubles down the road:
• Build up a safety nest of at least six month’s expenses.
• Don’t live within your means, live below your means. The bigger the margin, the more you save.
• Get rid of debt. If you have a mortgage on your home with a floating rate, consider locking in the rate. Similarly, with lines of credit that you can’t pay off. Interest rates may jump without warning. Banks are already increasing interest rates on your low interest cards and lines of credit—some by as much as three per cent. That works out to 30 to 40 per cent higher interest payments, and most people don’t even realize the bank has done it. They just keep paying, and struggling, and getting nowhere.
• Look for a secondary source of income to increase your safety net, such as a part-time job or by renting out an eligible basement.
• Expect a lot of volatility in the stock markets.
• We are entering an age of frugality, so be frugal, but not cheap.
• It would be wise to put off big-ticket purchases and make do with what you have.
• If you are considering selling your home to buy another, make sure your home is sold first or risk being stuck with two homes and extra debt in an uncertain economy.
• Think twice about quitting your job.
• Reconsider whether you need all the cars you have. Each car has hidden costs.
All this may sound a tad alarming, but to get your financial house in order and protect your current mortgage interest rate for the next five to 10 years will reduce the stress on your life.