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Stressed About Your Mortgage? Here Are Some Tips to Manage it.

Given that a mortgage is the largest form of debt most people will take on in their lifetime, it’s not surprising that it can also be the source of at least some financial stress and anxiety.  A mortgage is a debt that most people need, but no-one really wants!

But have hope, there are a number of ways to reduce or hopefully eliminate that stress by adopting some easy to do tips and best practices to managing your mortgage. 

Automate your mortgage payments

You should never be in a position where you worry about whether you’ll have enough money in your account to cover your mortgage payments. A good first step is to have your payments come out of the same bank account that your pay cheque goes into. To avoid any possibility of a missed mortgage payment, see if you can match your mortgage payment date to your pay cheque deposit date, or to be safe, give yourself a day or two buffer. That said, if you insist on having a separate account for your household payments, ensure you automate the transfers.

If you’re manually transferring money to an account where those payments are withdrawn from, you run the risk of miscalculating the timing or amount of funds in the account, which could result in a missed mortgage payment. Even one missed payment can have consequences on your credit score and/or your standing with your lender. 

Increase your free cash flow

For those who find their mortgage payments are taking a big chunk of their monthly income, if you have have built up at least 20% equity in your home, you may be able to refinance to lower your mortgage payments and possibly get a lower rate too!

Keep in mind that to be approved for a mortgage refinance, your total debt service (TDS) typically must be under 44%. This means your mortgage payment, monthly property taxes, heating costs and any debt payments such as car payments, credit cards etc must be less than 44% of your verified gross monthly income.

A refinance can also allow you access equity in your home by replacing your current mortgage with a larger one. The additional funds could be used to pay off higher-interest debt, such as credit cards, thereby reducing your monthly payments and actually often giving you more monthly cash flow!

Refinancing a mortgage before maturity may result in a prepayment penalty, however it still may make sense and save you money, so it’s important to consult with a broker (that would be where I come in) to ensure refinancing is suitable for you.  

Pay off your mortgage sooner

If you don’t like the idea of a large mortgage debt hanging over your head, there are steps you can take to pay off your mortgage ahead of schedule.

Not only can the act of paying off your mortgage ahead of schedule have a positive impact psychologically, it can also save you thousands in interest over the life of your mortgage.

The most common ways you can speed up paying off your mortgage is to increase your mortgage payment, change from monthly to bi-weekly or even weekly payments or make a lump-sum payment. If you’re increasing your mortgage payment, some lenders allow you to double your payment amount, while most permit increases ranging from 10% to 20%. If you are looking to make a lump-sum payment, most lenders cap these payments at 15% or 20% of the mortgage amount per year.

In both cases, be sure to check your mortgage contract to verify your lender’s prepayment terms.  I may be able to help you there.  Be careful about paying down more than is permitted as that can result in prepayment charges.

Talk to a professional

If you do find yourself experiencing mortgage stress, or anticipate that you may soon have trouble making your mortgage payments, you should talk to a mortgage broker (again that's me) right away.  I would be more than happy to offer a no-obligation consultation to review your situation and offer customized solutions.