These are crazy times! But with crazy times, come opportunities. When you turn on the news or look at your social media feed there’s a flood of news around the COVID-19 pandemic. From school closures and event cancellations to people stocking up on home essentials, it’s hard to hide from what’s going on.
Now, how can this situation be an advantage for mortgages you ask? Well, because of the uncertainty, this global crisis has already had an impact on many mortgages across Canada. To mitigate the economic damage, the Bank of Canada has been lowering interest rates. And here’s what it can mean for mortgages:
- Fixed rate mortgages
- Variable rate mortgages
- New mortgages
- All-In-One Lines of Credit
The drop in interest rates is not going to affect fixed rate mortgages. You’ll continue to make the same payments at the same rate of interest. However, if your renewal date is coming up, this might be a good time to refinance. Refinancing means breaking your present mortgage to get a new one at a lower rate. In some cases, refinancing could save you thousands of dollars and help you pay off your home sooner.
If your current mortgage is a variable rate mortgage, you might see a drop in interest! Perhaps you’ve already noticed that you’re paying less on your mortgage due to the rate decrease. This usually changes automatically whenever there’s a change in interest rates.
Some variable rate mortgages offer the borrower the option to convert part or all the mortgage to a fixed rate. With rates so low, this may be a good time for you to consider moving to a fixed rate.
If you’re a first-time homebuyer, you should consider the benefit from these low interest rates. Whether you decide to go for a fixed rate mortgage or a variable rate mortgage, the benefit is that your mortgage is going to be more affordable than it was a few months ago.
However, the first-time home buyer should use caution in getting a larger mortgage. With lower interest rates the temptation can be to get a bigger mortgage than you would have when rates were higher. If there’s a potential recession and you lose your job, your ability to make your monthly payments could be adversely affected. Before you take on more mortgage than you can handle, consider what would happen if you lost your job and couldn’t get employment for a while.
If you have built up some equity in your home, today might be a good time to consider other mortgage products such as an All-In-One line of credit. This is a different type of secured loan which is often used for things like financing home renovations or consolidating higher interest debt. Solutions BankingTM through the National Bank of Canada offers an All-in-One line of credit.
The All-in-One is a comprehensive cash management solution that uses the equity in your home or secondary property to consolidate all of your banking and financing needs. All-in-One allows you to manage your cash flow needs through a single account instead of using a variety of financial products to manage your money. It integrates the features of a mortgage, line of credit, chequing account, savings account and a source of financing. All-in-One can be used for everything from day-to-day expenses to home renovations, investment contributions or even as an emergency fund. By combining borrowings, income, chequing and savings into one product, every dollar saved will help you achieve your financial goals.
Without trying to downplay the seriousness of the COVID-19 pandemic – and it is serious – the reality is that there are also opportunities to take advantage of. If you’d like a personal consultation on how you might use the latest cuts to mortgage interest rates to your advantage, please give me a call at 519-777-3755.
This information is general in nature and is for informational purposes only.