bank of canada + interest Rates - let’s talk

Bank of Canada announced this week that they increased the rate by 1%.

What does this mean to you?

If you have a fixed rate mortgage you won't be impacted until renewal. If you have a variable rate, your debt became more expensive

If you have a fixed mortgage: should you focus on paying off your home while you have the benefit of a lower rate?

I LOVE THAT IDEA if it's an option for you + something you’re considering.

Keep in mind that there are prepayment limitations and if you do more than you're allowed there'll be fees and penalties

By reducing your mortgage while you have a lower rate over the long term you will likely save thousands of dollars!!

Although you should pay more for something 'just because it's a tax deduction' this is an important consideration if you have BOTH a primary residence and a rental. If you want to reduce your mortgage, if may make more sense to accelerate the payments on the mortgage where the interest IS NOT a tax deduction.

The downside of shifting your $$ to debt, is now you have less to spend and/or less to save. And with the bumpy-ness of the market at the moment, if you are investing for the longterm, the opportunity cost of shifting those dollars could also cost you thousands of dollars.

That's where your specific numbers will have to come into play as well as your comfort levels and stress.

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ACTION STEPS BASED ON YOUR COLOUR

🧡 Grab two coffees and pop into your advisors office. If they recommend some changes for you be sure to ask "can we make that automatic?"

💙 what are your timelines and what impact means the most to you. Remind yourself that savings and debt aren't in CONFLICT with each other they work together and you have the flexibility to shift between the two as your priorities change

🤎 go to your tidy filing cabinet, pull out your mortgage information, find out what your prepayment privileges are.

💚 calculate how much $ you'd be willing to toss on to the mortgage, if you put 100% on how much interest will it save you? how much sooner will you be mortgage free? Now take that same $ amount and put it into your TFSA (if you have the room) assume a 6% rate of return. How long do you have to contribute that $ to match the interest saved?

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