It’s possible to cushion the blows if you’re lucky enough to have a little cushion behind you and some time ahead of you.
Posted at 5:00 am.
Joëlle Saint-Pierre did it. She recognizes it: she is lucky. She spent part of her career in healthcare before becoming a public service executive.
She purchased a lovely semi-detached home on Quebec’s south coast in 2015, three years before she retired in 2018 at the age of 55.
For a time, she took on independent contracts that allowed her to supplement her retirement income. She invested this additional income in special projects. They did not take the expected form.
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In 2019, Joëlle Saint-Pierre extended her mortgage loan for a new term of five years.
“I had a fixed interest rate of 2.54%, which is still pretty good,” she admits.
The rise in mortgage rates didn’t initially worry her.
“I said to myself: My extension isn’t until December 2024, it doesn’t matter. »
In the spring of 2023, however, she became aware that interest rates were showing an unpleasant persistence in rising.
“Then I said to myself: Oh my God! I’ll see how much I would have to pay if I extended it! »
These predictions turned out to be eloquent.
“I calculated as if I would renew in December 2024 at a rate of 7%,” she describes. I estimated it would cost me about $210 more per month. »
The additional cost of $12,600 over five years was worrisome for a cash-strapped retiree.
PHOTO EDOUARD PLANTE-FRÉCHETTE, LA PRESS
Joëlle Saint-Pierre
I said to myself: If I accept this increase, it will be a bit annoying. What would it look like if I made an early repayment?
Joëlle Saint-Pierre
His mortgage agreement allowed him to make a principal payment of 15% of the loan amount each year at the start of the term. She could therefore make an initial repayment of $27,000 in 2023. She planned a second repayment of $20,000 from the beginning of the fifth year of the term, in December 2023.
Using this strategy, his calculations showed that the mortgage balance would be reduced to $69,000 at the time of renewal in December 2024.
Assuming a 7% fixed interest rate and a five-year payback period, “payments remain at around $1,380 per month and the balance is at 0 in December 2029,” she notes.
On this day: “My house belongs to me!” »
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“I feel very privileged to have the financial resources to be able to use this solution. »
An availability that is not alien to his foresight.
Most of the money comes from additional income accumulated in the first few years of retirement.
It’s a question of priority. I could say that I certainly want to travel more, but I tell myself that by the time I’m 66, I’ll have my house paid off. I think it’s still good.
Joëlle Saint-Pierre
The time factor is also crucial. She made her calculations 20 months before the deadline. “If I had waited to meet an advisor at the bank, I would have been completely surprised, but now I am well prepared,” says the pensioner with reassurance.
“I know it’s not for everyone. I have the privilege of having a defined benefit pension. But for me it is my path. Since doing this I haven’t been stressed and I’ve been sleeping well. »
The sleep of the righteous. Just in time.