January is usually a tough financial month for most of us. Holiday bill payments, rrsp contributions, property tax bills and if you are self-employed, you probably have to make some sort of business tax or corporate tax payment. If December is the Holiday Season, then January feels like a hangover!
BANKS and Credit Card companies love this time of year because this is when we will normally carry a balance and have to pay those crazy interest rates that range from 9% to 24%. Wait, before you get too depressed, there could be a better option. There’s a less expensive way to manage your debt.
DEBT IS DEBT, JUST PAY LESS INTEREST
Canadians seem to think debt consolidation is a dirty word. Studies show that we are paying down our mortgage balances faster (I like that trend) except we are carrying other debt like car loans, unsecured lines of credit and credit card balances. (Sorry Banksters, I’m leaking your secret) The big problem here is that these non-mortgage debts carry much higher interest rates ranging from 6% to 24%. So, when did it become okay to carry a smaller mortgage but still carry all that other debt? (don’t forget, mortgage rates today range from 2.50% to 3.40%. Which rate would rather pay?)
WHY THESE EGGS BELONG IN ONE BASKET
Professor Moshe Milevsky from the Schulich school of business published a study about debt diversification. The results show some clear differences between Canadians and Americans. We have better hockey players, better ski mountains and better beer….. sorry, that’s not it. His results showed that we don’t like to touch our mortgages… we’d rather use other credit facilities with higher rates. And this type of thinking has to change.
“Don’t put your eggs in one basket”. Well, that might work for your assets but it doesn’t work for your liabilities. I’m not sure why so many of us think this way. Maybe it’s because our parents told us to pay off our mortgage first. Good advice, but they didn’t say to borrow other money at higher interest rates. Or maybe it’s because we are being hammered by the media with reports about ‘record personal debt levels’ and somehow we believe that if we don’t touch our mortgage, we aren’t part of that group.
TIME TO CHANGE AND SAVE $$
Stop and think about your current situation. Do you have some equity in your home? Do you owe more than $20,000 in other debts? If so, then you could start saving money immediately. With house prices at all-time highs and mortgage rates still in record low territory, it’s a great time to review your options. Speak with an experienced mortgage broker today.
Your best interest is my only interest. Buying, refinancing or renewing your mortgage? Contact me for the best rates and terms.
As always, I welcome your comments, calls and questions.
Steve Garganis 416 224 0114 firstname.lastname@example.org