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Your mortgage in a recession
By Riki Unrau
The dreaded ‘R’ word was dropped earlier this week by the Canadian Government to a chorus of nation-wide groans. But a recession can be an opportunity in disguise if you understand exactly what it means for you and your situation.
In terms of your mortgage, you really needn’t worry about skyrocketing interest rates bringing your mortgage payment up with them. Most people lock into five-year terms on average so you are safe until your term is up. Even then, interest rates typically go down in a recession, which is why it is an excellent opportunity to re-finance at a lower rate, purchase a home for yourself or obtain an income property. We just saw proof of this on Wednesday when the Bank of Canada lowered its Prime Rate.
Believe it or not, if you have the means to do so, purchasing property in a recession can be an incredibly smart thing to do. Not only are you taking advantage of a great interest rate, but prices tend to go down as well allowing you to capitalize on the situation. Times like these are when professional investors shine. There is no reason why you cannot shine too.
The main issue we need to concern ourselves with in a recession is job stability. Layoffs are fairly common but they do not have to be fatal. If you find yourself temporarily without a job there may be options open to you.
Some mortgage lenders will allow you to skip a payment or simply pay the interest only portion of your loan until your situation improves. There also may be a clause in your mortgage insurance that will cover some payments for you. Whatever happens please do not think ignoring it will make it go away. If you start missing payments without informing your lender what is going on then you could face defaulting on your mortgage.
Lenders do not want this to happen to you and will do everything they can to work through this with you. But you need to make the call before the ball drops.
If you have any questions or concerns about your own mortgage needs please contact your local mortgage broker.
– Riki Unrau is a Mortgage Broker with CENTUM Homeward Mortgage Group Ltd.
