Financial Strain
Recent statistics paint a concerning picture about consumer debt in Canada.
Here are some eye-opening facts from Statistics Canada and Sagen’s (Sagen is a residential mortgage insurer in Canada) recent 2024 Homeowner Trends & Financial Fitness Study:
- The average Canadian owes $1.77 for every dollar of disposable income.
- 46% of Canadians are $200 or less away from financial insolvency each month.
- 94% of Canadians say that a payment amount that fits their budget is the top factor when choosing where to renew or obtain their mortgage.
- 42% of Canadians are worried about making ends meet month to month.
- 13% of Canadians have to dip into their savings just to pay their monthly bills.
These numbers highlight the growing financial strain on many households.
Why not let your house help? Refinancing may be a good option.
Refinancing is the process that repays your existing mortgage and starts a brand new mortgage, usually for an increased loan amount and/or changing rate/term/ amortization.
Most mortgages can be refinanced at any point (there are a few exceptions and your mortgage professional will advise if this affects your file). But, whether or not you should depends on several factors [OAC]:
- Are your monthly bills higher than what you’re comfortable with? You may be able to consolidate all your debt into your mortgage. This often betters monthly cash-flow.
- Do you have a big expense looming? It may make sense to take the equity out of your home to pay for any large expenditures you have coming up.
- What is your prepayment penalty on your existing mortgage? If you’re breaking an existing closed mortgage to refinance, you’ll pay a penalty. Check your mortgage contract and figure out how your lender will calculate your prepayment penalty. Penalties are generally 3-months’ interest on variable-rate mortgages and the greater of 3-months’ interest or the interest rate differential (IRD) on fixed-rate mortgages. Ask your bank or broker for your penalty cost.
- Do you have a mortgage renewal coming up anyway? At renewal time, the mortgage may be rewritten with a new or current lender. Lenders love nothing more than to earn a new client a renewal time, at their cost. You can lock-in 120 days in advance of a renewal date.
- Reach out to a Mortgage Broker. Apply with a Mortgage Broker (who is an independent financial advisor that specializes in the mortgage industry). Brokers are experts in every available choice of financing for your home. A Mortgage Broker finds the best-fit mortgage for your particular circumstance. And, in most cases, a Mortgage Broker’s work is without charge to the borrower. Broker’s are paid a commission from the lender.
Support available to Canadians experiencing hardship
Banks do not want to see their customers in financial difficulty and provide a number of resources and supportive measures to assist those who might need help in managing their money and their debt. If you are experiencing hardship, you are are encouraged to speak to your bank to discuss your situation.
Candace Perko, Mortgage Broker
