In 2014, Frank & Phyllis purchased their first home. The value of their home has risen and is now worth $950,000. They are currently in a 5 yr variable rate of 2.5% and are concerned with the recent increase in mortgage rates. During the last 2 1/2 years they made the decision to use their line of credit for home renovations ($22,000), purchased a new car ($34,000) and needed to use credit cards to pay for an important family vacation and cover unexpected medical expenses.($18,500) Frank & Phyllis are both employed and receive a fixed annual income. They are both concerned about the recent increase in mortgage rates and how to best protect their financial future.
What should Frank & Phyllis do? They contacted their Mortgage Professional for advice.
Their Mortgage Professional completed a Mortgage Review and provided three solutions to consider.
Option #1 – Transfer – this would allow this couple to transfer their current mortgage balance into a 5 year fixed term, and ensure that their mortgage payment is protected from further rate increases.
Option #2 – Refinance and Consolidate – this option shows that by accessing home equity to consolidate this couple’s outstanding unsecured credit balances they would increase their after-tax cashflow by $485 and ensure that the mortgage payment is protected from further rate increases.
Options #3 –Wait until renewal- this option shows that by doing nothing now, this couple could be in an unfortunate position when their mortgage comes up for renewal in 2 and ½ years. They would be forced to renew at market rates. *note: please read the most recent economic update from Dr. Sherry Cooper, Chief Economist for Dominion Lending Centres to see her forecast for interest rates going forward.
Conclusion/Summary: It can be seen that Frank and Phyllis can best protect their financial future by being proactive and taking action now, using either option 1 or option 2 to protect against expected future rate increases. Everyone’s situation is unique which is why it is so important that you speak with us at DLC the Professionals so we can help protect your financial future.