Paying off a mortgage is one of the most freeing feelings we can experience, and a lifelong goal for many. However, with today’s low-interest rates and borrower-friendly terms arranged through your mortgage broker, aggressively paying down your mortgage no longer has the urgency it once did. Before you make paying every last penny of your mortgage down the top priority, organize these aspects of your financial plan first:
Pay Off Consumer Debt
Your number one priority should be to pay off all consumer debt from credit cards that come with a high-interest rate. Remember, credit cards have interest rates around 20% annually, while the prime interest rate on mortgages in Canada is around 3%. Tackle your cards in order of interest rate until your consumer debt is gone.
Have an Emergency Fund
Are you liquid enough to handle an unexpected car repair, a broken furnace, or a devastating event like the loss of a job? Would your only option be to charge these expenses or fund your lifestyle on a high-interest credit card? Don’t worry about making extra mortgage payments unless you have a healthy emergency fund. Experts recommend building up an emergency fund that covers at least six months to a year of living expenses for you and your immediate household.
Plan for Retirement
In retirement, you must make the adjustment from wealth accumulation to income generation. To plan for this, budget for contributions to your RRSP and RRIF along with a diverse portfolio of tax-free savings, mutual funds, stocks, real estate, and other investments.
If you have young children, it will astound you how quickly 18 years pass and that first semester of university or college approaches. Before you concern yourself with paying off your mortgage in full, make sure you have a healthy education savings fund for your children.
Invest In Your Health
If you suddenly became sick, developed a chronic illness, or became physically unable to work, how would you cope? It would become difficult if not impossible to pay for basic living expenses, nevermind making extra payments on your mortgage. Your health and your body are a long-term investment that make your financial goals possible, so don’t neglect yourself with a balance of healthy diet and exercise. Also consider the option of critical illness insurance and life insurance to protect your family against the worst-case scenario.
Finally, before you worry about making extra payments on your existing mortgage, talk to your mortgage agent from The Mortgage Advisors about your options for renewing or refinancing your mortgage. Your mortgage agent will help you find the best mortgage solution for your needs, to reduce interests costs and get you out of debt faster.
For more information about organizing your financial priorities and achieving your financial goals, speak with a mortgage agent from The Mortgage Advisors to learn more.