Currently, there is a ton of talk about what’s in store for interest rates. Will they rise or will they fall? Chances are, you’re are looking for some good advice on how to reduce the impact of a negative scenario: rate increases.
Besides winning the Powerball and paying off all your debt in full, here are my favorite tips to reducing interest costs–paying more interest on debts than you need to can significantly affect your finances, so consider doing one or all of these tips:
- Hedge Your Bets: First of all, start by building an interest rate movement assumption into your thinking. What goes down, must go up. Okay, that may not be how the saying goes, but rates do have to go up. For no other reason then we need our investment returns to go up on our retirement savings — It’s not fair our grandparents bought the safest of investments, Canadian Bonds, and got away with an 11% return! We can’t get that today on high risk maneuvers!
- Pre-Payment Privilege: It’s simple to compare interest rates by using a mortgage broker vs. a banker. So by using a Mortgage Broker like myself, your debt should always have lowest rates. So focus on amortization. I suggest setting up your loan at the longest amortization possible, so you can fall-back on low payments in the event something bad happens, like job loss. But–immediately use your privileges to pay extra. By increasing your monthly payment by 20%, you pay off a mortgage 5 years quicker! A typical $300,000 mortgage would eliminate over $82,000 dollars in payments at the end of the mortgage.
- Accelerated Bi-Weekly: So now that we are attacking amortization, lets continue by paying accelerated bi-weekly. This again creates increase debt repayment by effectively making one extra monthly payment each year. That reduces your amortization by an additional 32 months! Roughly two and a half years less payments eliminates another $43,000.00 in payments. Between using your 20% privilege and paying accelerated bi-weekly, you have eliminated $125,000 from the end of you mortgage!
- Other Debts: What should matter to you is the total average rate that you pay over all your loans and mortgages. Consider combing all of your debts for a more cost effective solution, but match your current payments to accelerate these debts payoff–do not pocket the savings of the lower rates.
Remember you can mortgage and debt plan the same way you tax plan or investment plan. You can protect your income and retirement through elimination of inefficient interest payments. These cash flow techniques not only pay down debt principle quicker, but also protect you from interest rate increase and fluctuation.
By Referral Mortgage Consultants*
“Click, Call, Chat – Award Winning Brokers”
1 – 32540 Logan Ave
Mission BCV2V 6G3
360-3033 Immel St
8387 Young Rd
Dave 604 897 2741 Jordi 604 615 1312
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*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp.