How will I afford it if my mortgage interest rate goes up one percent?

2021-12-07   minute read

Dean Prentice

Lifestyle Debt

Debt Solutions

Mortgage rates are going up. How will you afford the increase in monthly mortgage payments?

If you have a $300,000 mortgage, a one percent increase in interest rates costs you $175 per month more on your mortgage. If your rate goes up two percent, then your mortgage payment is $350 higher. Where will you find the money?

Homeowner looking at laptop assesing the options MNP can give her regarding mortgage affordability

Think about this — if you need $350 more today to pay your mortgage, what will you cut back on right away? Dining out, fuel, Christmas or holiday gifts? Now, try it. See if you can cut back your spending $350 over the next 4 weeks, and put that $350 in a bank account. If you find you need to withdraw the money to pay your bills, then that is what it will be like when your mortgage rate increases.

Next, consider if you are really saving money. Remember, saving money means you have money staying in a bank account, or being invested without your debt increasing.

Paying your mortgage on time or saving money in a bank account while your credit card debt increases means you are paying your mortgage with credit card debt. Saving money in an RRSP or TFSA while your credit card debt rises means you’re saving for RRSPs and TFSAs with credit card debt. And credit card debt is much more expensive than your mortgage.

Saving interest on credit card debt is a valuable way to save money. It may not be so obvious as you can’t see your savings account balance rise, but you are saving more money.

Act now, make those changes in your spending to get your credit card debt down as fast as you can.

If you are worried that you won’t be able to pay down your credit card and bank loan debt while trying to afford your mortgage, then consider making a consumer proposal on your credit card debt. Proposals don’t affect your mortgage, and you can keep you house (and your car) when you make a proposal.

Call MNP today at 310-DEBT, and find out how a proposal will help you pay your mortgage while getting out of debt.

Consultation icon