The Rollercoaster of Interest and Debt

THE ROLLERCOASTER OF INTEREST AND DEBT

Feel whoozy these days when you think about your mortgage and climbing interest rates? The Bank of Canada says rates may climb several percentage points this year. Homeowners, with floating mortgages and variable interest rates, may be hardest hit. More so, if you overextended your budget to buy the most home possible, at the lowest floating rate you could find. Now that great room may not seem so great. Even a one- or two- point rise in interest rates can mean hundreds of dollars difference each month on big mortgages. Where can you find those dollars to help you keep your home, and meet this rising cost?

Get professional advice. Even in extreme circumstances-illness, job loss, or other dire situation-there are experts who will show you how to save money-yes, even hundreds of dollars each month. These experts are often available to you for free, through your mortgage lender, bank, or government service. Some are even available online, and you can submit your questions anonymously, by email. Use them. They know their stuff.

Don’t be embarrassed to ask for help. Money management is something few of us have ever been taught. And it’s only through hard money knocks that we get smart about our finances. Save yourself some pain, and ask for help before your debt overwhelms you. For example, it’s sometimes possible to lower your monthly mortgage payments by re-amortizing your loan over a different period, or making fewer payments. You can contact your credit card company and ask for a lower interest rate. Does this feel like you’re admitting financial defeat? You’re not. This is a smart financial tactic to keep your debt under control, your bill payments out of arrears, and you out of collections.

Find money pockets. Your chequing account eats green. Take a look at your chequing account for the past month, and start adding up all the overdraft charges, debit charges, and ATM charges to just give you one small example of where you can save money to help make up that mortgage gap. Start using cash, and stop incurring those costs.

Income tax returns. Put that money into a savings account or short term GIC. Use it to help make up that mortgage gap, not to go south for the winter. HST rebates, Child Tax Credits, and other government money can also be set aside for that mortgage increase.

Lower your income taxes. It might be worth your while to see an accountant to be sure you’re getting all the income tax back that you are owed. You can go back as much as seven years to be sure you haven’t overpaid on your taxes. You might be pleasantly surprised. Oh-and the cost to see that accountant? Deduct it from next year’s tax return.

Start a home business. You bought your home, now make it pay for you. If you start a home-based business, and put it into that great room you own, you may be able to deduct a number of home-related costs-mortgage interest and property taxes, to name just two of them.

Bottom line. Don’t hedge your financial bets, ever. Live simply enough that the rollercoaster of rising and falling interest rates will impact you and your family as little as possible. And don’t take the claims of economists too seriously-they’ve been wrong before. Stay calm, keep on top of your financial situation, and get help when you need it-and that’s always before the storm hits, not after.