Rising interest rates making 30-year amortization more popular for homebuyers
As interest rates continue to rise, the cost of buying a house in Ottawa and across Canada is becoming more expensive. Many homeowners are now forced to extend their mortgage payments.
Sabrina and Joey Pasqua recently had their third child. As the cost of living continues to rise, they’ve decided to spread out their debt and extend their mortgage commitment to 30 years.
"Thirty years is a long time to be paying down your mortgage," Sabrina said.
Joey adds, "Due to the fact that we have less capital to put down on our current property and interest rates almost doubled, we have to go with a 30-year mortgage to ease our monthly payments."
The Bank of Canada raised interest rates again this week, another quarter point to 4.75 per cent.
Sabrina says their current home sold for much less than it could have a year ago.
"This home did not sell for what we thought it would sell. And so we have less of a down payment to put on that home."
Thousands of homeowners are making the choice to increase the amortization period for their mortgages. Last year, 30 per cent of mortgages from major lenders like BMO, CIBC, and RBC, had an amortization of at least 30 years.
Just two years ago in October of 2021, the number of 30-year mortgages was zero.
Mortgage agent Frank Napolitano acknowledges the advantages and drawbacks of longer amortization periods.
"If you amortize it over 30 years, you're at least getting a little bit of relief for now while the interest rates are high. The downside of a higher amortization is that it obviously takes longer to pay off your mortgage, and there's less money going towards the principle," Napolitano, with Mortgage Brokers Ottawa, says. "The only thing that 30-year amortization or a 25-year amortization does is a guideline for what your payments are. That's all it is. You get to control how quickly you pay off your mortgage based on how aggressive you want to be with your payments.”
If you go with 30 years, you can change it back, paying it off more quickly, even if it feels very unlikely right now.
"Everybody in this country is already putting money towards the RESP in order to help our kids go to school," Joey Pasqua says. "It's like, what's next? Do we have to start saving to help our kids buy a home?"
CTVNews.ca Top Stories
DEVELOPING Live updates as Stormy Daniels testifies at Trump hush money trial
Adult film star Stormy Daniels is on the stand a second time Thursday as former U.S. president Donald Trump’s hush money case continues in Manhattan. Follow live updates here.
BREAKING Sheldon Keefe out as head coach of Toronto Maple Leafs
The Toronto Maple Leafs have fired head coach Sheldon Keefe. The team made the announcement Thursday after the Original Six franchise lost to the Boston Bruins in seven games in the first round of the Stanley Cup playoffs.
Bank of Canada says financial system is stable, but risks remain
The Bank of Canada says the Canadian financial system is stable, but risks remain due to debt servicing costs among households and businesses and stretched valuations of financial assets.
Here are the ultraprocessed foods you most need to avoid, according to a 30-year study
Studies have shown that ultraprocessed foods can have a detrimental impact on health. But 30 years of research show they don’t all have the same impact.
Ontario man frustrated after $3,500 paving job leaves driveway in shambles
An Ontario man considering having his driveway paved received a quote from a company for $7,000, but then, another paver in the neighbourhood knocked on his door and offered half that rate.
Why these immigrants to Canada say they're thinking about leaving, or have already moved on
For some immigrants, their dreams of permanently settling in Canada have taken an unexpected twist.
RateMDs violates privacy of health professionals, class-action lawsuit claims
A lawsuit against RateMDs has been given the go-ahead by a B.C. Supreme Court judge who found the claim that the website violates the privacy rights of medical professionals is not 'bound to fail.'
Boeing 737 catches fire and skids off the runway at a Senegal airport, injuring 10 people
A Boeing 737-300 plane carrying 85 people skidded off a runway at the airport in Dakar, Senegal's capital, injuring 10 people, according to the transport minister, an airline safety group and footage from a passenger that showed the aircraft on fire.
Capital gains tax change 'shortsighted' and 'sows division' business groups tell Freeland
Forging ahead with increasing Canada's capital gains inclusion rate 'sows division,' and is a 'shortsighted' way to improve the deficit, business groups are warning Finance Minister Chrystia Freeland.