Pay your high-interest debt first
According to a recent survey from the Canadian Association of Accredited Mortgage Professionals, 32% of home owners have accelerated their mortgage payments during the past year. But what about high-interest household debt?
In the wake of widespread concern that Canadian household debt is at an all-time high, a recent report from the Canadian Association of Accredited Mortgage Professionals (CAAMP) paints a slightly different picture.
Over the past 20 years, mortgage repayment periods have reduced to two-thirds of the actual contracted period. In addition, Canadians are using a variety of methods to accelerate their mortgage payments and reach mortgage freedom faster. Aggressively chipping away at debt is always a positive thing, however a closer look in some cases shows that these increased mortgage payments are causing other debts to be neglected. Outstanding balances on credit cards, lines of credit and car loans are often seen rising while the mortgage balance is falling.
Mortgage freedom is tempting, but when it comes at the expense of paying more interest somewhere else, focusing on the mortgage payments doesn't necessarily make sense. Every individual financial situation is different, and where extra cash is allocated depends on the household. Use extra cash flow to reduce higher-interest debt or talk to an Ottawa Mortgage Broker about refinancing your mortgage to consolidate debt.