Buy a house, don’t buy a house, the rates will increase or they won’t. All kinds of speculations are floating around with no concrete conclusion other than the fact that we are still in a low interest rate environment.
It’s been reported that despite the current low mortgage interest rates, Canadians don’t seem to notice the opportunity to pay off their debt faster. The Central Bank of Canada has once again lowered its overnight lending rate and it feels like the low rates are not just a trend but may be in effect for some time. However, analysts are saying the low interest rate environment is not here to stay and rates are bound to go up.
Interest Rates Are Bound To Increase
As they say, all good things come to an end. Economists are predicting rates are bound to go up, which worries the banks and what’s to happen with household debt. The U.S. has already had their first increase of 2015.
— Finance agent (@finance_agent) February 2, 2015
The current low interest rate environment is the best opportunity to pay down your mortgage faster and cut down on the years of paying interest. Even turning your monthly mortgage payment to a bi-weekly payment will shave off significant amount of interest and save you thousands of dollars in the long run.
For example, on a $300,000 mortgage at a 4.00% with a 25 year amortization you can easily save about $150/month in interest cost if you add additional $100/month to the mortgage payment and change the payment to bi-weekly.
Economists believe there will be a housing correction and interest rates will eventually increase. Why not take advantage of current low rates and ease up your debt load for the future? It will mean spending a little bit more on debt now but easing up your wallet for retirement or for your children’s college and university tuition.
First Time Home Buyers
Additionally, those who are taking advantage of the low interest rates to purchase a home now, must also take into consideration whether they will be able to afford the payments once the rates increase. Ted Rechtshaffen, president and CEO at TriDelta Financial, says timing the market isn’t a good idea.“It’s not about prices or the mortgage rate, it’s whether you can truly afford to own the home.” Before committing to a mortgage, calculate whether you can afford the payments when the interest rates climb back up to 4% or 5% several years from now. A mortgage is usually a long term commitment and a lot can happen to the interest rate over the long term.
Benefits of Increasing Your Current Mortgage Payment
- save thousands on interest, use this simple mortgage calculator to see how much you would save with a bi-weekly vs. monthly payment
- lighten up your retirement, be mortgage free faster
- travel faster, reduce your mortgage interest costs and have more money to spend on travelling, helping your kids through college, or conquering a forgotten hobby!
- retire stress-free, look forward to retirement and have less debt obligations