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July: The perfect time to check in on your mortgage

July 8 2016 by Denis Doucet
What you'll learn
  • Adapt your mortgage payments as your financial situation evolves
  • Analyze your budget to get a clear picture

Looking to adapt your mortgage payments due to a change in your financial situation?  Even if your mortgage renewal is still a few years away, it doesn’t mean you can completely ignore your mortgage loan. In fact, most of the time, your payments can be adjusted at any time, based on your needs and objectives—all without having to renegotiate your mortgage.

Major life changes

If you have recently experienced a major life change, your mortgage payments most probably no longer correspond to your reality.  For example, if you recently landed a promotion or a new, permanent job, you may be inclined to increase your mortgage payments. 

On the other hand, if your work hours have been cut or have recently welcomed a new baby and one parent is on parental leave, you may want to alleviate your budget by temporarily decreasing your payments. 

With most mortgage agreements, you can modify the payments you make to reimburse your loan. In addition, many financial institutions offer their clients the opportunity to skip a payment. Call your mortgage broker or financial advisor to learn more about these options

Make and stick to a budget

July is a good time to start planning your vacation—and your budget based on the destination you’ve chosen. Why not take the opportunity to develop an annual budget (if it hasn’t been done already). A well-structured budget must take into account your revenues as well as three types of expenses:

  • Weekly expenses: groceries, drugstore, gas and entertainment
  •  Monthly expenses: mortgage, electricity, insurance, automobile loan, public transport passes, and communications fees (cell phone, internet, landline and TV)
  • Annual expenses: Driving permits and license, clothing, vacation, house upkeep

It’s important to remember that the amount dedicated to housing should never represent more than 35% of your gross revenue. If this is not the case, it would be wise for you to reduce your mortgage payments.

The impact on your mortgage

After having subtracted your expenses from your revenues, evaluate the results. Is your budget balanced (expenses are equal to revenues)? Are you in the red (expenses exceed revenues)? Are you in the black (revenues exceed expenses)? This will help you to determine if you must maintain, increase or decrease your mortgage payments.

If you’re in the black, you may consider increasing your mortgage payments. This will go a long way in paying off your mortgage faster—and with less interest. To visualize how your monthly payment amounts influence the interest you pay or your mortgage term, use our online mortgage payment calculator. Don’t hesitate to book an appointment with your Multi-Prêts broker to get more information.

Key takeaways
  • Establish your budget to determine if your mortgage payments are adapted to your current financial situation.
  • A change in your financial situation can be a good opportunity to revise your monthly mortgage payments. 
  • Higher monthly payments can help to reduce the interest you pay on your mortgage.
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