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= IB MONEY MATTERS SRIVINDHYA KOLLURU Waterloo Chronicle | Thursday, July 6, 2023 The steep rise in the cost of borrowing is proving a major burden for Canadian households. Between 73 and 80 per cent of borrowers who signed onto variable-rate fixed-payment mortgages between 2020 and 2022 hit their ‘trigger rates' by early 2023, according to a Nation- al Bank of Canada report. Your interest rate in- creases with the prime rate, which fluctuates based on the Bank of Cana- da's overnight lending rate. For variable-rate hold- ers, this means that while your monthly payment re- mains fixed, your payment will go more toward inter- est than principal. Eventually, there will come a point when 100 per cent of your payment is go- ing toward interest, and none toward the principal, says Ross Taylor, president at Toronto-based Ross lor Mortgages. Your mortgage balance starts to increase than decrease once ae hit your trigger rate, says Taylor, “where you're back to where you started with your mortgage owing." an example, some- one who qualified for a $600,000 mortgage amor- tized to 30 years ata1.25 per cent mortgage rate in 2020 would id pay around $2,000 a Naa, if I run that pay- DIVERSIONS MY MORTGAGE LENDER SAYS I'VE HIT MY ‘TRIGGER RATE.’ WHAT DOES THAT MEAN, AND WHAT ARE MY OPTIONS? ment in my trigger rate cal- culator, | this borrower hit over fc "says Taylor. “So, once the inter- est rate on their mortgage increased from 1.25 to, say, 4.25 per cent, this borrower is no longer paying down this translates to an extra couple hundred dollars a month. But for Canadians si gling with cash f flow and unable to shi that sticker shock, there are other options. The first step, according to Elan Weintraub, co- founder and director at Mortgage Outlet, is to call our lender. If you're up for renewal, your lender might suggest putting down a lump-sum re he to cov- er your prin Or, your ender will roll your remaining principal into your mortgage. Either ay, Weintraub recom- mends contacting a mort- gage broker to explore the Dreamstime photo As interest rates rise, more of your fixed monthly payment goes toward interest than principal. In worst-case scenarios, you can end up paying only interest. best rates and lender: Weintraub says one option your broker might put on the table is to refinance your entire mortgage and re-amortize it back to 30 years. " “ans you basi- cally reset your mortgage,” Cross Weintraub explains, add- ing that this will offer some short! term relief. wers should also takes a r holistic look at their complete financial picture. While there's not much you can do about interest rates, Scott Plaskett, certified fi- nanci aging partner and CEO of Iron Shield Financial Planning, says you can evaluate your overall cash flow. For example, if the in- terest on your mortgage is eight per cent, but your in- vestments only earn five per cent, Plaskett says there's now a cost to hold- ing onto those investments instead debt because the differen. tial is not working in your favour. “People have to La stand that being liquid in challenging economic en. vironment is more impor- tant than being debt-free or equity rich,” he says. "You run into a real pickle if something happens to your cash flow and you don't have the cash on the side." sword puzzle answers use American spelling CROSSWORD SUDOKU INTERMEDIATE ACROSS 42. Peddle 19. Concealed 1. Come again? 45, Gusted 21. Store a 915 5.Santa’s staffer 47. Recompensed 99. Large brass horn 6 8. Bird’s “arm” 48. Dove's call 23. Pub orders 12.Comic Bob____ 49, Cracked open 2 5 L 1 3 13. Bogey beater 53, Teen skin problem 22 UMP 14. Aroma 54, Unusual 26. Come forth 714 15. Chooses 56. Ire 29. Gentlemen 218 5 3 16. Wintry 56. Formerly 30. Faithful 1 i d 57. Adios! 31. Hankerings 5 2 8 Nip and . 20. Soared 58. Tinted x ae pane 9 8 21. Discolor 5. Facing the ocean DOWN 24, Female sheep " Which persona 36:Nary asoul 7 3114615 27. Ships bottoms 5’ bane sien 402 Othe past 3 71149 28, River barrier 2. Bunny’ step - 3. Prone 42. Petty argument 29. Sow’s home 4.Grumpil 43.1% hi 32. Heeded . Grumpily . o__! lis own 34. Urge 5. Long tale 44, Succession ig o 36. Mas’ mates, 8.Was without 46. Mother_ a fa | § 37. Etemity i Cook nan 48. Corn core In fa] 3 39.Secondhand TV + g Sia evours) 50.HostLeno 3 3 a 40. Informed of 9. Fan favorite 51.___ of Aquarius a 5) et 3 41. Helium and 10. Naught 52. Like Rudolphis |56 fa i [9 S —nitrogen,e.g. 11. Increased nose EI ial Z