The big banks are raising interest rates – here are tips on how to react from Ann Kaplan, president and CEO of national consumer finance company iFinance Canada.

Move to a fixed rate mortgage: Call various banks and negotiate the best rate. Consumers should be more willing to negotiate generally, whether it be rates, purchase prices or contracts.

Pay your mortgage down early: Look at the early paydown opportunities in your mortgage. Banks will allow between 10 percent and 20 percent of the original mortgage amount to be paid down each year without penalty. You can pay your mortgage out a lot faster – an absolute must in a raising rate environment.

Leveraging your assets: If you have a second income property (in the same name/ownership) you are better to have a larger mortgage on that property than your primary home. Interest can be written off against income generated from a rental property – ask about increasing debt on your rental property and decreasing your personal mortgage.

Renew your mortgage early: If you are close to the end of term on your current mortgage, ask your banker if they will charge a break fee to renew. Again, negotiate the rate and see if you can get the break fee waived. If within three months of the end of the term, banks will generally hold a rate for you. Keep in mind that banks want to retain your business.

Pay down your line of credit or second mortgage: Mortgage rates are generally a lot less than the cost associated with a line of credit or second mortgage. If you are renewing, try to combine (increase your first mortgage) and pay down any associated line of credit or second mortgage.

By Myke Thomas

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