Is your budget ready for higher mortgage rates?

Is your budget ready for higher mortgage rates?
Tips for preparing your personal budget to meet increasing housing costs

by Carmen Chan

If you’re a Canadian homeowner, you’re probably wondering if your budget is ready for rising mortgage rates. If the thought of renewing your mortgage has stressed you out, you’re certainly not alone. According to data from the Canada Mortgage and Housing Corporation (CMHC), 2.2 million mortgages – 45% of outstanding mortgages – will be up for renewal in 2024 and 2025. But don’t worry, by proactively adjusting your budget, you can navigate these changes with confidence. Here are some tips to prepare your budget for rising mortgage rates.

1. Understand your new mortgage rate

Before making any adjustments to your budget, it’s important to understand how your new mortgage rate will affect your monthly payments. You can start by requesting a mortgage renewal statement from your lender or broker and set up an appointment to talk to them about the changes.

Meanwhile, you can also estimate your new monthly payments quickly and easily with Online mortgage calculator. Be sure to ask about any additional fees or changes to terms, so you can factor that into your revised budget. Knowledge is power and this type of research is a good way to get a clear picture of the new rate and how it will affect your mortgage payments.

What happens to mortgage rates when interest rates rise?

2. Reevaluate your financial situation

If you haven’t already, re-evaluate your financial situation. Mortgage renewal time is a good reminder to check your finances and make any needed adjustments. Unsurprisingly, higher mortgage payments mean a tighter budget. To make sure you’re prepared, evaluate your income, expenses, and any existing debts. You can also see potential areas you can cut back or ways to increase income and help bolster your revised budget.

How to protect yourself from rising interest rates