Mortgage Payments Are Becoming Challenging
October 11, 2023
The most significant challenge for some over the next few years is making their mortgage payments, writes Peter Watson.
Many have already experienced the effect of higher interest rates. The lucky ones have locked in a specific mortgage rate that has not come due, but that day is coming.
There are several realities to homeownership. Many purchased as an expensive house they could base on what mortgage amount they qualify.
Just a few years ago prevailing mortgage rates were extremely low. Meaning they qualified for a large mortgage and therefore were able to buy an expensive house.
Mortgage payments will increase significantly and potentially double or even more.
A priority for most is homeownership. People will do whatever it takes to stay in their house. Mortgage payments will be a financial priority.
Nonessential items such as dinners out and entertainment will be curtailed or eliminated. Pending expenses, like house renovations and travel, might be put on hold.
Some will consider selling their car. That will largely depend on the commute to work and access to public transit. This might be a time to sell your boat or other expensive recreational vehicles.
Investments can be sold and that could trigger income tax implications. Withdrawing money from an RRSP means the amount of money is taxable as income in the year received.
Plus taking money set aside for retirement might be an option to continue making mortgage payments but that just creates another problem down the road. How will you access funds when you retire if they have been depleted?
There is also the option of renting out space in your house.
If you are facing a significant financial challenge of making mortgage payments, then this is your time to be creative and think of all possible solutions.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com