Contributed by Sean Rankin from Smart Debt Mortgages
Sensible credit strategies to help you thrive in 2022
Canadians keep talking about the housing market! Are we in a housing bubble, will rates rise in 2022 and by how much, is this the right time to buy or refinance, is a lender’s renewal offer the best available, and on and on! For many, it feels like some uncertain times ahead. Often, it’s just a few sensible strategies that can help you thrive in the current climate. Here are my top tips for the year ahead:
- Take care of your credit. It’s so important to have good credit behaviours so you always qualify for the best mortgage rate. Pay your bills on time. Don’t let your credit accounts exceed 30% of the credit available. Before you cancel any credit cards, get advice. And don’t apply for a store card just to save on your purchase that day!
- Get advice before locking in your variable mortgage. It will take several prime rate increases for variable rates to be on par with a fixed rate, and you are likely better off sticking with your original strategy of focusing on payment vs. rate. Get in touch if you want to discuss the best strategy for your situation.
- Consider a refinance if it makes sense. Whatever your need might be – paying down high-interest debt, renovations, helping a child buy a home – you may want to refinance your mortgage and take advantage of rates that likely won’t be around too much longer. I can complete an analysis to help you determine whether it makes sense for you.
- Speed up your mortgage pay-down. Change from monthly payments to accelerated weekly or accelerated biweekly, which increases your number of payments and takes years off your mortgage. Also consider putting found money like raises and tax refunds against your mortgage principal. Check your mortgage contract for the amount you can prepay each year. If you can increase your payment amount, you’ll be accustomed to paying the higher amount should rates be higher at renewal.
- Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, that’s a signal to get in touch. This is your opportunity to negotiate the best possible deal!
- Get a pre-approval. A pre-approval will tell you how much you qualify for, what your mortgage payments will be, and you’ll get an interest rate that will be held for up to 120 days so you are protected should rates rise. If you are house shopping, you won’t fall in love with a home you can’t afford, and you can act quickly when you find your dream home. Pre-approvals also make sense for renewals and refinances when rates are rising.
- Let renters help pay your mortgage. A home with a rental suite can be a great option for homebuyers, especially if the area you love is pricey or you don’t want to buy a condo at a lower cost. It’s also a great option for existing homeowners looking to lower their mortgage payment.
- Don’t neglect your savings. In managing debt, you want to make sure you don’t need to use credit to get you through a financial emergency when your car breaks down or your washing machine quits. Make a point of setting aside a small sum every paycheque into a special emergency fund. Having a budget can provide the discipline you need. It might not be the most thrilling task, but it’s one that will give you a clearer picture of where you stand and how much you can truly spend.
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