Can I afford higher mortgage rates?
By Daryl Harris on November 20, 2013
Are you prepared for higher mortgage rates?
Yesterday, the OECD (Organization for Economic Cooperation and Development) said that the Bank of Canada may need to start increasing rates in 2014 and 2015 by as much 2.25%. This theory is based on the fact that Canada’s economy will start to gather steam and exports will be higher than expected. The OECD is a global think tank represented by the worlds leading economies. They also warned of inflated home values in Canada.
On the same day, CAAMP (Canadian Association of Accredited Mortgage Professionals) released their report on the State of the Residential Mortgage Market in Canada. They survey consumers like you and ask them plenty of mortgage related questions. One of the big questions asked, Can you afford higher payments if rates increased to 5%. While the majority of consumers would have no issues with higher mortgage rates, there was a small percentage who would have challenges.
Herein lies the question you need to ask yourself, can I afford higher mortgage rates? A simple solution is to perform a “Mortgage Rate Test”.
Every month, two weeks or week you have a mortgage payment. Go to this calculator and increase the existing rate on your mortgage by 2.25% (ex. if your rate is 2.89% enter 2.89+2.25 or 5.14%).
You will need your existing mortgage balance and your existing amortization period. If the payment that appears scares you, some planning and preparation will ease your mind. Secondly, if you are planning a major purchase that you may be financing either by way of a loan, line of credit or refinance, take the test before the purchase.
The Higher Mortgage Payment Calcuation
The key is to start planning now and implementing strategies to help you when rates start increasing. I have a 15 minute “Don’t Break the Bank Challenge” that would be based on your situation that can be done in person or via on line to help you be prepared. Contact me now to take the challenge. My new tag line will be, “Putting minds at ease since 2013!”