Refinance your home loan
During the past year, as millions of Canadians twiddled their thumbs at home, many took advantage of remarkably low mortgage rates to upgrade to a bigger prison. That turned up the heat on an already scorching real estate market.
While higher prices mean first-time homebuyers will still struggle to get a foot in the door, today's ultra-low rates mean Canadians who already own a home can potentially save thousands by refinancing.
As a rule of thumb, if your credit score is in good shape, you have at least 20% equity in your home and your current mortgage rate is 0.75% higher than current published rates, it’s time to look into a new deal.
Keep in mind your home’s rising value also offers an opportunity to leverage your equity for all kinds of needs, like funding home improvement projects or paying down high-interest debt. (If you live in the Greater Toronto Area, you can find out how much your home is worth in about two minutes.)
Consolidate your debt
The pandemic made it difficult for anyone to travel, eat in restaurants or spend on retail purchases, and many used the money they didn't spend on those activities to increase their savings and pay down debt.
With little to do, many Canadians saved more than they ever had before — with the savings rate surging from 1.4% to an incredible 14.8% in 2020, according to the Conference Board of Canada.
At the same time, families that lost work during the downturn have been struggling to make ends meet. A quarter of Canadians had to take on more debt, one in five had to raid emergency savings and 14% used credit cards to cover monthly expenses, according to a survey by consumer insolvency firm MNP Ltd.
If you’ve been relying on credit cards or other forms of high-interest debt to carry you through, the monthly drain on your bank balance will add up quickly.
For those who can’t borrow from their home equity to pay off card balances, a debt consolidation loan could help you get out of debt sooner and save you a ton on expensive interest.
Work on your credit score
While today's low rates allow people with even middling credit to find an affordable loan, that will change when rates go up.
Take a free peek at your credit score, because now’s the time to work on improving it. When borrowing costs are higher overall, it's even more important to unlock the lowest possible rate.
Boosting your credit score will make you more attractive to all types of lenders, from credit-card issuers to those offering mortgages.
Refinance your private student loans
As with other forms of debt, missing payments on your student loans can tank your credit score and make it harder for you to rent an apartment, buy a home or even get certain jobs.
But if you’ve been struggling to make your payments, your first move shouldn't be a refi. Instead, check whether you qualify for a government Repayment Assistance Plan.
Why? Even though it's easy to get a good rate on a private loan right now, refinancing a government loan through a private lender will disqualify you from student tax credits and other support.
However, if you already took out a private loan or line of credit to cover excess education costs, refinancing today could offer serious relief. Be sure to compare loan offers from multiple lenders to lock in the lowest rate possible.
Find better returns in the stock market
While the low interest rate environment is great for borrowers, it also means you'll earn next to nothing if you dump your cash in a savings account.
If you’ve got the appetite to take on a bit more risk, consider investing your extra money for a much stronger return. Keep in mind, some popular platforms allow you to invest your cash for free.
And even if you only have a few loonies to spare, you can sign up for an account that invests for you using your “spare change.”