Getting Out Of Debt Takes Planning And Discipline

Whether we’re financing monster homes, shiny new cars or exotic vacations, the statistics say Canadian households are up to their eyeballs in debt. So what’s a super spendthrift to do?

According to Gail Vaz-Oxlade, borrowers need to consider more than the lowest interest rate. Consider your personal discipline level. For the highly regimented, that means a line of credit as rates are low and there’s flexibility in paying it back. For those impulse buyers, fixed personal loans are best because paybacks can’t be dithered with.

When it comes to managing your debt, take the football approach. You need to tackle it. Go after high-interest loans such as credit cards first and be diligent about mowing those down.

Figure out who you owe money to and how much. Believe it or not, some people prefer to keep their head in the sand when it comes to paying the piper. Or perhaps they owe so many different credit cards and banks that they can’t keep track. Try using a calendar on your computer or mobile device. Set an alert a few days ahead to notify you that a payment is due.

Try not to miss payments. That affects your credit rating and makes catching up on debt repayment all the more difficult.

Work on building an emergency fund. Everyone needs one for those for, well, emergencies. If you don’t have one to dip into, you will likely go further into debt.

Finally, set up a monthly budget. This lets you see if you have enough money to cover your debts and to live. It gives you the heads up that you may need to take action if you don’t have enough money to back down your debt. If there’s money left over, earmark for debt repayment.

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A Big Down Payment Means Big Savings Over The Life Of Your Mortgage

Big Down payment Saves You Money

Did you know that conventional mortgages require a 20 per cent down payment? With the national average home price pushing $400,000 that would mean a down payment of $80,000. Here’s why acquiring some patience and saving up for that home purchase might help:

The more down payment you put down, the less your mortgage payments will be. This makes your day-to-day living and budgeting that much easier. Think of all the interest you will save.

Chances are that you may not pay as much in interest as your neighbour. A lower loan-to-value ratio means the lender views you as a more favourable risk. This, of course, saves you money over the span of your mortgage.

If your down payment is substantial, you won’t be required to obtain mortgage insurance, which is an added expense over and above the cost of your mortgage. Mortgage default insurance protects the lender should you not be able to pay your mortgage. It is expensive, though, and gets pricier the lower the down payment.

Let’s compare a five per cent down payment with a 20 per cent one on a $365,000 home: Based on a four per cent mortgage rate and a 25-year amortization, you will pay $37,000 more in interest payments by putting down five per cent instead of 20. Your bi-weekly payments will be $156 more adding up to over $4,000 more each year.

Dreams of living mortgage free will come sooner if you eat away at your mortgage thanks to the different payment options available these days at banks and credits unions. Take advantage of bumping up the amount of your mortgage payments (usually in the range of 10 to 20 per cent) , making lump-sum payments against your principal annually without being charged, or switch to an accelerated weekly or bi-weekly payment schedule. All of these options will help you achieve financial freedom and have you living mortgage-free a little sooner.

See what’s for sale in your neighbourhood – Do a quick search

Do a Quick Home Market Evaluation and see how much your home is worth.

Thank-you for reading our article about saving money by having a big down payment, contact us if you need anything or leave us a comment below.

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