Mortgage payments on the rise? Here are some ways to make do

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Whether you bought your home at the peak of the market or have owned it for many years, mortgage renewals during this time of high interest rates are causing Canadians a lot of sleepless nights.

Struggling to afford your base housing cost, whether that’s rent or a mortgage, is one of the most stressful situations you can find yourself in and I often get asked what someone can do to get by.

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Start by objectively reviewing your overall financial situation because you need a baseline from which to make financial decisions going forward. At a bare minimum, you need to know how much is coming in, what’s going out and where it’s being spent. At this point, it may be helpful to track household spending for a few weeks. This will identify habits and patterns, and shed light on where your money is really going.

The emotional often overrides the mathematical when it comes to making spending decisions, and therein lies the problem when we face challenging circumstances.

You might have more house than you can comfortably afford because you wanted to buy in a certain neighbourhood or had specific ideas in mind when you bought. You might not want to rent out a room or storage space in your house because you don’t want a stranger around. You might be reluctant to ask for more hours at work for fear of what others will think. You could be hesitant to look for a second job because you’d need to put yourself out there and apply. Or maybe you don’t want to have a garage sale because you worry about what others will think of you flogging your wares.

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If you’ve dismissed those options for emotional or practical reasons — for example, starting a gig interferes with childcare arrangements — set them aside and revisit some other options. View your situation through the lens of helping an acquaintance: what would you suggest to them if they were in your position? Take your own advice and start with the easier choices.

For instance, are there utility bills you could cut or temporarily reduce? Think about cancelling all but one or two streaming services, scaling cellphone plans back to what you need and stopping subscription services or memberships you don’t fully utilize. If child care costs are holding you back, perhaps you and your partner can realign your working times to either eliminate child care from your budget, or have time to turn a hobby into a money-making venture.

If you notice that you spend a lot on take out or meal delivery, map out your week to include a meal plan, a refined shopping list for groceries and time to make meals ahead of time. If you’re worried this takes away time from your kids or your partner, make it a joint effort and have some fun doing it.

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If you don’t, you could face the big question, such as whether it’s worth selling your home and buying somewhere cheaper, looking for alternative living arrangements or moving in with family to share costs. That’s a much tougher question to face, but it becomes a financial reality when your mortgage payment goes up hundreds of dollars a month.

While you’re working to reduce your expenses, increase your income and shift to a more cost-conscious mindset, also work on the bigger things that could help you get by and avoid more drastic financial measures.

Reach out to your lender to see what it can offer. A payment deferral could help you manage one emergency expense, but it’s not a long-term budgeting strategy. However, extending your amortization to reduce your payments might be. If refinancing is an option, hear your lender out about the cost-benefit analysis because there are times when it makes sense to pay or capitalize the penalty.

Also reach out to a tax professional while doing your research to see what the implications would be if you rented out all or part of your home. Perhaps you could move into your suite and rent out the main living part, or move out completely. It’s also the start of tax season so it’s a great time to explore options to generate a large enough tax return next year without jeopardizing any income-dependent benefits you receive.

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If your challenges with living costs due to high mortgage interest rates are left unchecked, your situation could devolve into defaulting on your mortgage. Rather than allowing your creditors to make financial decisions for you, take the bull by the horns and do everything you can to avoid that happening. This means reducing what you spend in every category of your budget and putting your credit cards away. Avoid relying on a home equity line of credit (HELOC), help from family or online payday loans to pay your bills.

Making tough financial choices is that much harder when emotions are running high or you’re at odds with your partner about solutions. An objective third party in your corner can help you chart your path forward. They can help you consider your financial options and solutions to get back on track, rather than emotional or legal alternatives to repay what you owe.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 27 years.

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