MORTGAGE Blog & ARTICLES
You Can Get a Big Mortgage, But Should You?
Home is the biggest asset that you can’t afford to lose. Are worried about losing it due to high mortgage obligations and other personal debts? There are ways to eliminate your mortgage and keep you most valuable property. One of the most important things that you should know is your financial options.
Prices of property nowadays are much higher than the actual income of every family in Canada. Despite of this real scenario, people are still motivated to become owners even though they are overstretching their family budget.
The big question now for many is how much mortgage you can afford to risk? It needs your mathematical and analytical skills to compute for your mortgage interest rate.
If your interest rate rises from 3% to 4%, can you determine how much it goes up? The answer is 1% but on a higher sense, your mortgage interest rate increases by more than 33%. With this incredible increase, the state’s interest rate is deadly.
Way back in June 2014, one of the state’s bank has made an announcement about their increased on their 5-year closed mortgage. The interest rates will be from 3.09 % – 3.29%. Other banks also expressed their future plans to increase their lending rates.
The increased are not yet felt by most people but it’s quite alarming. Possibly, it is just the beginning of a new market trend towards bigger amount of interest rates which is an additional burden for home owners. Expect that smaller increases will eventually lead to a shocking huge number. This might be the dirty reason behind those small increases. But, the increase in the interest rate is not the main issue here. What matters most is the budget that you should have to pay your obligation.
What could be the best option you should take to avoid bankruptcy and economic downfall? If you are a Canadian, the best decision is to avail a variable rate instead of the fixed rate mortgage. It is more practical to get much lower rates. Expect that rates can still go down or it can also rise up. Just don’t assume that it will stay low for a long period of time.
If you will observe the banking industry follows a trend. If one bank started to increase their rates more likely the other banks will do the same in the next following days. What you can do now is to make a plan on how to deal with a potential increase rate.
Do you have a long term plan to stay in your house? Now, is the perfect time to switch from variable to fixed rate. This is applicable to those individuals with stable income. If you have extra budget in your pocket, you can shorten your amortization period by paying your mortgage. This way, your bank’s interest obligation will be reduced.
Just in case your income is not anymore stable and you plan to move into a cheaper place. Consider renting or selling your home to shield yourself from pitfall.
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