Thursday, 2 June 2011

How to Prepare for Higher Interest Rates



The Bank of Canada is leaving interest rates at 1%. You can almost hear the collective sigh of relief from Canadians on a variable rate mortgage.  But, Bank of Canada governor Mark Carney is hinting that he will start raising rates towards the end of the year. I spoke to Kelvin Mangaroo, president of RateSupermarket.ca, on how homeowners can prepare for a rate hike.

Here are some quick tips on how to prepare for higher interest rates:

  1. Calculate how much your payment will rise when interest rates go up, 0.5% 1% 1.5%.  Mortgage Rate Calculator
  2. If you’re on a fixed mortgage and searching for a lower mortgage rate you can use this calculator to see what your penalty will be. Penalty Calculator
  3. For new homeowners calculate your payments based on a higher interest rate, to ensure you can afford an interest rate hike
  4. If you can afford it,  make a lump sum payment on your mortgage now. At a lower rate more money will be going towards your principal
  5. Always consult a mortgage professional to figure out your options, every homeowner’s situation is unique.
  6. To avoid extending the life of your mortgage recalculate payments when rates go up, often it’s the difference of only $50 a month to keep up your current schedule

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