Best Of Both Worlds
“Lower Rates And Flexible Repayment Terms Are The Best Of Both Worlds When It Comes To Mortgage Financing”
There is a lot in the news these days about household debt rising in Canada, due largely in part to the low cost of money that is currently available.
Economists are concerned that even though things are going well for Canadians compared to people in other parts of the world, that we risk backing ourselves into a corner with higher debt levels that leave our economy vulnerable when interest rates eventually go up.
So while it only makes sense to take advantage of lower interest rates when it makes sense, it is also possible to have the best of both worlds, that being lower cost of capital and lower debt.
Assuming that paying down debt is important to consumers, then it makes sense to be budgeting your cash flow to apply more to debt reduction when cash is being freed up by lower interest rates.
The challenge for most debt reduction is that it needs to be structured in order to occur.
For instance, if someone has a mortgage or a car loan, they will have an amortized payment can identifies how much money they need to spend every month on debt service.
As debt holders, we get conditioned to having this amount available and direct the remaining cash flow to other expenditures.
With a little bit of focus on personal cash flow, its usually very possible to come up with some amount of incremental money during the year that can be applied to the outstanding mortgage balance above and beyond the payment amount.
Over time, even small amounts can eat into the balance owing and significantly reduce both interest costs and total debt load.
And because many of the residential and commercial mortgage programs today are filled with different payment options to retire your debt sooner without prepayment penalties, it truly is a period in our history when you can have the best of both worlds.
The challenge is coming up with a financial plan that you can implement to pay down your mortgage sooner, and then making sure that any mortgage you enter into has the payment features built in to accommodate your plan.
Low levels of interest can allow you to afford the things you need today. A proper debt retirement plan will make sure you are in good financial shape into the future, regardless of where interest rates moves.
A little bit of planning and for thought can go a long way and save you a considerable amount of money along with reducing financial risk.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel