How to Protect Your Wealth

- Hedge against Rising Interest Rate Environment
- Rate Hike
- Home Owner Options
- Fixed Rate VS Variable Rate

- Well, we know interest rates are going up. What are you gonna do to protect your wealth? Interest rates are going up. The Bank of Canada met last week and they basically said rates will start to rise. And we could see a rate hike as early as March of this year. So, as a homeowner, what are your options? So if you're holding onto a mortgage today, there are a couple of options. If you're holding onto a fixed rate mortgage you're, basically, protected of any future rate increases. If you're holding onto a variable rate mortgage your payment and your interest rate are likely to increase with future rate hikes. Now, if you are a home buyer, one of the strategies you should be considering is to get your mortgage pre-approved right away. Get your rate locked in today, okay? So the way a pre-approval mortgage works is you go to your bank, you talk to them. They lock in the rate as of today. So you get the lowest rate as of today. They pretty much guarantee you the lowest rate between today and 120 days. So if rates went up, you still get the lower rate. If rates go down, you get the lower rate within today and your closing date. So if you're first time home buyer or you're looking to purchase a property get yourself pre-approved and lock your rates in now, before they go up. So how do you hedge against a rising interest rate environment? Variable rate is around 1.45%. A fixed is around 2.79%. So the higher interest rate mortgage product will command a 2 or $300 increased payment over the lower interest rate. So what you wanna do when you're hedging is you take the 1.45% variable rate mortgage but you make the extra 2, $300 payment every month going forward, right? So thereby you're accelerating your payment structure on your mortgage. So that's one of the ways you can hedge against a rising interest rate environment. So if you're sitting on a mortgage today and it's either a variable or a fixed rate mortgage consider talking to your financial professional. You want to look at the benefit of breaking your mortgage today and locking in at today's interest rate, which is much lower than it probably will be a few months from now. Another way you can hedge against rising interest rates is to split up your mortgage into two components, okay? The first component say 50% of the mortgage would be in a variable rate mortgage. The other 50% of your mortgage would be in a fixed term mortgage. And this is very easily accomplished with many of the banks that have HELOCs or Scotia has called it the Scotia Total Equity Plan, very easily accomplished. Talk to your professional about those options as well. That's it for now? Talk to you on the next one.