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TORONTO, ONTARIO--(Marketwire - June 28, 2011) - Recent figures show household credit market debt climbed to an all-time high of $1.524 trillion in Q1, or a record 147.3 per cent of disposable income. While growth in household debt has cooled in recent months, it continues to outstrip income growth. Furthermore, Bank of Canada Governor, Mark Carney, has spoken out about the housing market, advising homeowners and prospective buyers to be cautious ahead of higher interest rates.

Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal, suggests Canadians stress-test their mortgage in advance to make sure any potential increase in interest rates are manageable. "Currently, BMO Bank of Montreal offers a five-year fixed low rate mortgage to all Canadians at a current posted rate of 3.79 per cent. With a 25 year amortization, homeowners can save thousands of dollars in interest costs over the life of the mortgage."

BMO offers the following tips for Canadians to help them reduce mortgage debt and become mortgage free faster:

Consider a shorter amortization:

• The shorter the life of the mortgage, the less you pay in interest.
• Choosing a 25 year amortization can help you become mortgage free faster and ultimately put more savings towards long term goals, such as retirement.

Make sure you can afford your home, both now and in the future:

• Stress test your financial budget using a mortgage payment based on a higher interest rate. If your rate rises even 1 per cent from 5 to 6 per cent, you will need an additional $146 per month on a $250,000 mortgage amortized over 25 years.
• Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

Think about the future:

• View your home as an investment. Consider its location and accessibility, and whether or not renovations may be required down the road.
• Pay down short term debt before taking on a major financial commitment such as buying your first home or upgrading to a larger home.

Make a larger down payment:

• If you can provide a bigger down payment, it's a significant way of helping you pay less interest over the life of your mortgage.
• With a down payment of at least 20 per cent, you avoid paying mortgage default insurance.

Make pre-payments when you can:

• Pay weekly or bi-weekly instead of monthly.
• Increase your mortgage payment (principal and interest).

Think carefully about fixed vs. variable:

• While variable rate mortgages have been a winning strategy over the long term, fixed rate mortgages (currently at historic lows) provide the peace of mind of insulating you against rate increases and the certainty of knowing how much of your mortgage you will have paid down at the end of your term.