Recent rumblings in the financial markets have made some homeowners nervous – especially those with mortgages that may be coming up for renewal. With inflation creeping upward and interest rates threatening a continued rise, is this the time to lock-in a fixed rate mortgage? Or is the upward pressure on interest rates merely a short-term event, thus making a variable rate mortgage a better gamble over the longer term?
Know yourself Ask yourself questions like these:
- Do I want to pay off my mortgage as quickly as possible or am I better off focusing more on investing for retirement?
- Do I want the lowest cost mortgage?
- Do I want my mortgage paid off by the time I retire?
- Should I consider converting my mortgage interest costs into a tax deductible investment expense?
- Do I want a low-rate mortgage so I can borrow against it for investments, a reno, or to consolidate other higher-interest debt?
- Can my budget stand short-term interest rate increases and the ‘payment shock’ that can happen with a variable rate mortgage?
- Similarly, will interest rate increases lead me into ‘negative amortization’? This is a gradual increase in mortgage debt that occurs when your fixed monthly payment doesn’t cover the increasing interest due. It can add years to your mortgage.
- Can I sleep at night? Ahh, the insomnia factor – any investment, including your mortgage, is probably not right for you if you constantly worry about it.
Before making your final mortgage decisions, it’s a good idea to seek the advice of a professional advisor.
John Scholl B. Mathematics, CGA,
Wealth Management & Financial Planning
Please contact him at 416 731 3660