How to Cope with High Mortgage Payments

These past months, inflation has slowed down and mortgage rates have decreased a bit. But homeowners who must renew their mortgages will still be facing much higher monthly payments. What consequences will this increase generate? Is there a way to limit its negative impacts?

In short

Do you need to renew your mortgage soon?

  • To avoid finding yourself backed in a corner, consult with a financial advisor who will help you organize your payments and review your budget.
  • Don’t jump to easy solutions!
    • Avoid mortgaging your house to pay off your debt.
    • Avoid alternative mortgages, which often carry very high interest rates.

Although mortgage rates have slightly gone down, they remain at historically high levels. Many homeowners who must renew their mortgages directly bear the brunt of this situation. They are already finding it hard to make ends meet and they now must make high mortgage payments.

Naturally, such an increase has impacts at several levels:

  • The household budget becomes even tighter.
  • Homeowners who must make higher mortgage payments do not have enough cash to pay off their other debts.

What impact does this increase in mortgage rates have?

Such a situation can lead to what is called “financial strangulation,” when you feel that you cannot breathe because you are drowning in debt.

Overwhelmed by debt and by the increase in both mortgage rates and the cost of living, homeowners often have no other choice than selling off their assets or having them seized by creditors. Indeed, according to the firm JLR, mortgage surrenders in Quebec have jumped by 27% in the first six months of 2024 compared to the same period last year.

The risk of foreclosures caused by indebtedness is therefore currently extremely high in Canada and the interest rate cuts do not make much of a difference.

How can you prevent indebtedness and financial strangulation?

Fortunately, if you are a homeowner facing a mortgage renewal soon, there are solutions for you.

  • Act before it is too late! Contact your financial institution and make an appointment with a financial advisor, who can help you organize your payments and reassess your budget.
  • Don’t jump to easy solutions!
    • For example, avoid mortgaging your home to pay down your debt. Although, at first glance, that may seem like a good idea, there are several pitfalls associated with such a solution.
    • Avoid alternative loans: they often come with very high interest rates and will only increase your overall debt.
  • Review your household budget and figure out if you can cut some of your non-essential expenses.

In summary, if you find yourself in this situation or if, although your mortgage isn’t up for immediate renewal, you realize that you cannot manage your mortgage payments, don’t hesitate to contact one of our licensed insolvency trustees!

A consumer proposal could be a solution to restructure your debt and put in place a more manageable repayment plan, while protecting your assets, including your house.

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