- 43% of 55 year olds say they haven’t saved enough for retirement.
- 50% of Canadians believe they’ll run out of money within 10 years of retiring.
- 1 in 4 retirees bear the load of a mortgage.
- 51% of today’s borrowers expect to carry a mortgage into retirement.
Imagine the trauma of depleting your savings, being without full-time income, and still having a mortgage payment. For some, it’s a doomsday financial scenario.
Luckily, there is a straightforward New Year’s resolution that can help forestall this outcome:
Increasing one’s mortgage payments.
You don’t need to raise them by much. For someone with 20 years left on a mortgage, for example:
- A 2% annual payment increase will retire that mortgage 3.6 years sooner
- A 3.5% annual payment increase will retire it 5.3 years sooner
- A 5% annual payment increase will end it 6.7 years sooner
(Assumes a static 3.49% interest rate for simplicity.)
Every extra $1 of principal that you pay down today saves a minimum of $1 in interest over a typical mortgage lifespan.
So, while you’re making New Year’s pledges to exercise more, eat better or the like, consider a resolution that dramatically improves your financial health. If you don’t have a better use of your free cash flow (i.e., you don’t have higher yielding investments, higher interest debt to pay off, etc.) then take a step towards the peace of mind of owning your home free and clear. Do what 60%of Canadian mortgagors never do, and voluntarily raise your mortgage payments.
For more information about your mortgage please feel free to call me at 1-888-819-6536.
With the hike of fixed rates again last week with some of the 5 big banks variable rates are looking attractive with a discount if -40 off prime interest rate currently at 3% making a 5 year variable rate 2.6%. A 5 year fixed is 3.39-3.79 depending on lender.
Variable rate mortgages are a great option but also come with a few challenges too, to qualify for a variable rate we must use a higher rate which can impact your borrowing power as well they fluctuate with the Bank of Canada prime lending rate so there definitely is more risk attached.
Best way to know if variable rates are for you is get informed and look at all your options. Any questions you can call me or email me! 1-888-819-6536 or firstname.lastname@example.org.