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What to do Before Canadian Interest Rates Rise?

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What to do Before Canadian Interest Rates Rise?

canadian-interest-rates-smWhen it comes to the Canadian economy, the last few years have been a whirlwind of activity. Record low oil prices which hurt the economy and a dollar which fell to levels we haven’t seen in years led the Bank of Canada to drop Canadian interest rates to record lows.

For some, a lower interest rate has been a good thing – the ability to afford more and spend less – but for others the trouble will come when those rates rise.

What will happen when rates go up? CBC News tackled this question in a really interesting article recently – Bank of Canada must open people’s eyes to debt sinkhole danger. You can check it out here: http://www.cbc.ca/news/business/debt-bank-of-canada-poloz-housing-1.3621994. With people buying houses left, right and centre, the mortgage bubble is set to burst and the results could be disastrous.

Think about it this way: the average price of a home in Canada is now more than a million dollars. That’s a lot of money. Even much more modest homes, though, can be seriously impacted by a rising interest rate. For example, a 2% increase in interest on a $300,000 mortgage amortized over 25 years would mean a $300 per month increase in your mortgage payment! For many Canadian families, that $300 could be the difference between affording a mortgage and losing the house.

In fact, the impacts could be so significant that economists have speculated that the only thing that could take down the Canadian housing market would be rising interest rates.

Since the average Canadian household is carrying heavy mortgage payments coupled with record levels of consumer debt, the best thing to do before Canadian interest rates go up is to get rid of that debt. Interest rates may not go lower than they are right now so now is actually the perfect time to use your home equity to deal with the debt.

A second mortgage, structured more like a loan than a mortgage, with a short amortization period, can help you consolidate all of those other debts that are costing you more in interest than actual payments on balances, and because a second mortgage is separate from your first you are not required to overcome the fees or penalties to refinance.

So, before interest rates rise and you find yourself struggling to pay your mortgage thanks to all of those monthly debt obligations, get rid of them. DebtCare can help.

Call us today at 1-888-890-0888.

 

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