Below are a number of scenarios that are happening across Canada, no matter what size the housing market is in your town. Homeowners are facing the effects of high inflation and high interest rates. Unfortunately, many financial experts are predicting another year or two before we can all breathe easier. If that is the case, we want to provide practical advice to help you navigate these trying times. Here are a few examples of the questions we get asked on a regular basis and what our Mortgage Advisors would offer under these circumstances.

• “I bought my home during the market peak when prices were very high and since then, prices have dropped significantly. So the home I worked so hard to achieve is starting to feel like a financial burden and frankly, I’m worried about the future.”
• “We bought our home with the minimum required down payment and took a variable rate because at the time it was so attractive. Now, with today’s rates, we’re finding it hard to make our mortgage payment and we’ve taken part-time jobs to help supplement our income. Selling isn’t an option because we’d have to sell at a loss. Plus, we worked so hard to get into the market and if we sell now, there’s no guarantee we’d be able to get back in! The extra work and constant worry are taking a toll on our physical and mental health.”
• “I’ve borrowed against my home with a home equity line of credit (HELOC) and with the decline in the real estate market, coupled with high interest costs on the HELOC, it’s becoming unmanageable.”
• “My spouse and I needed funds for an unexpected home repair, so we got an unsecured variable rate loan and only a little of our payment is going toward loan principal. Lately, our rate on the loan has gone up dramatically which is putting a huge strain on our household budget. Fortunately, we have a good amount of equity in our home, but we’re not interested in selling right now.”

Here are a few examples of how our team responds to questions like the ones above:

I understand the stress and financial burden you are experiencing. It’s important to take action to avoid further financial challenges. Here are some steps you can take.

• Consider locking in your mortgage to a fixed rate if you are in a variable rate mortgage. Since your variable rate mortgage has increased substantially over the past year and you are paying a lot of interest, it might be worth it to consider locking in with your existing lender, or refinancing into a fixed-rate mortgage. This will provide you a stable, unchanging interest rate, which will make it easier to managing and plan your finances. We can also walk you through seeing if your current mortgage lender can offer you a better rate, or an option to consolidate the HELOC into a mortgage to reduce interest costs.
• Look for ways to increase income. If you have been at your current job for a long time, it might be worth it to consider a promotion, or a job change that offers a higher salary. You can also look at flexible part-time jobs and side hustles to increase your income while things are tight.
• Reduce your expenses. I know it can seem impossible, but tracking your sending and finding ways to reduce your non-essential expenses could help in a big way. It is worth it to take a second look at areas you can cut back on. This could include eating out less, canceling subscription services or memberships you don’t use that often, or finding small ways to reduce your home utilities like hang drying your clothes, or turning down the heat and opting for fuzzy socks and blankets instead.
• Consider renting out your home, townhome, or condo, either entirely or partially. If you are struggling to make your monthly mortgage payments or other bill payments, you could consider renting out your home to generate extra income. This could look like doing a minor upgrade to include a suite in your home, renting out a room to a student, or moving in with family/friends and renting it out entirely. Before renting it out entirely, make sure your mortgage lender allows this and you know what your terms and conditions are.
• Seek professional advice. If you are having a hard time making ends meet, it may be worth it to seek professional advice from a financial advisor or credit counselor. They can help you develop a plan to manage your debts and expenses. If you do decide to talk to a credit counselor, make sure you are communicating with your mortgage advisor. A consumer proposal or bankruptcy could drastically affect your mortgaging ability in the future, so make sure you have all the information before moving forward.

The most important thing to remember is you are not alone in feeling this way and that the sooner you take action, the better you will be able to manage your financial stress. By working with professionals and taking the steps above, you can start to regain control of your finances and work towards a more stable future.

We are your Vancouver Island mortgage brokers serving you inVictoria, Nanaimo, The Cowichan Valley, Parksville, Qualicum, and beyond!

‍