Canadian’s Have Limited Time to Take Advantage of the 35 Year Mortgage
and Lower Monthly Mortgage Payments
With the rising cost of homes, especially in the Lower Mainland, many homebuyers have chosen a longer amortization period (the number of years it will take you to become mortgage free) in order to keep monthly mortgage payments lower. While this also means they pay more interest over the life of their mortgage and are slower to build equity in their home, longer amortization periods allows home buyers to qualify for higher mortgages and thus get into their dream home sooner. This is particularly helpful in high-cost housing markets such as Greater Vancouver’s. And even with a longer amortization period, home buyers can always choose to shorten their amortization and save on interest costs by making extra payments or an annual lump-sum principal pre-payment, depending on the terms of their mortgage.
While currently the Canadian industry’s benchmark amortization period is 25 years, the maximum amortization period allowed in
1) Mortgage amortization periods reduced from 35 years to 30 years.
2) The maximum Canadians can borrow to refinance their mortgage will be 85% of their home value, down from the current maximum of 90%.
3) The government will be withdrawing insurance backings on lines of credit secured by homes.
These changes are
CIBC chief economist Avery Shenfeld has referred to the mortgage changes as part of a larger move by the government to “force Canadians on a debt diet” as household debt levels sit at record levels. However, he also reassures us that “Canadians aren't on the verge of a U.S.-style default crisis – not at these interest rates, and not with debt having been granted to stronger hands than was the case before
When will these changes take place? These changes will not happen immediately because of a requirement to give the industry 60 days notice before making policy changes of this nature. This means we will likely see a surge in home buying over the next couple months, as many Canadians rush to take advantage of the 35 year amortization period.
If you are interested in taking advantage of the current amortization period before these changes take effect, give me a call!!
Keller Williams Elite Realty
778 866 7478