Two major banks recently raised their mortgage rates and other lenders are expected to follow suit. With the rising home prices, many new homebuyers tapped themselves out when they bought their recent home, trying to get into the market before homes became completely unaffordable. Unfortunately, if the rates go up, many homebuyers could be unable to pay their mortgage payments. Will you be able to afford your home if the rates go up, when it is time to renew your mortgage?

According to Global News, homeowners will pay about $22 to $121 more per month with the new current rates, depending on their mortgage length and amount. Of course, those with larger mortgages will pay the most, even with a slight rise in rates. While another $20 a month isn’t going to amount to someone losing their home, a few hundred a month more can mean the difference between making your payments and defaulting.

If you recently got a low-rate mortgage, you may be locked-in for the next five years, which protects you from any rate rise for that period. But, at the end of the five years, what will the rates look like? With historically low rates right now (being less than 3%), it is a safe bet to say this won’t last and rates could go back up to a general 5% or more. That difference can amount to a much higher mortgage payment for homebuyers who aren’t used to paying that much in interest.

What can you do?

First of all, if you haven’t yet bought a home, ensure you buy one that isn’t at the complete top of your budget. Leave some leeway for if the rates do go up, so you can still comfortably make a payment.

If you’ve already bought a home, do what you can to make extra payments while the rates are low. That way, if you need to renegotiate a new mortgage at the end of your term, your mortgage amount will be lower and you’ll have more room to work. You could technically keep the same payments if your total mortgage amount is less, even with the higher interest rates.

When it does come time to renew your mortgage, you will want to shop around for the best rates, even if they are higher than what you paid in the previous years. If you’ve made your payments on time and have ensured your credit remained stable, you will allow yourself the bargaining power you may not have had as a first-time homebuyer.

If you need help with advice on mortgages or buying a home, be sure to contact me.