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
Prince William says wife Kate is 'doing well'
Prince William said on Friday his wife Kate was 'doing well' in a rare public comment about the Princess of Wales as she undergoes preventative chemotherapy for cancer.
BREAKING Canadian Blood Services apologizes to LGBTQ2S+ community for discriminatory blood donation policy
Canadian Blood Services issued an apology on Friday to the LGBTQ2S+ community for what it now admits was a harmful and discriminatory blood donation policy that prevented sexually active men who have sex with men and some trans people from donating blood and plasma.
BREAKING 'Just wait': Toronto mayor hints that WNBA team is coming to the city amid multiple reports
Toronto Mayor Olivia Chow says that she is hopeful an announcement could be made soon amid multiple reports that a WNBA team is coming to Toronto in 2026.
Magnitude 4.2 earthquake reported off Vancouver Island's west coast
A 4.2-magnitude earthquake was recorded west of Vancouver Island early Friday morning.
Ontario coroner to investigate death of man who suffered cardiac arrest while waiting in ER
A provincial coroner will be investigating the death of 68-year-old David Lippert, who suffered a cardiac arrest while waiting in a crowded emergency room in Kitchener, Ont.
'Irate male' assaulted Newfoundland officers with block of cheese, police say
Police in Newfoundland say patrol officers were assaulted Thursday by a "very irate male" wielding a block of cheese.
Dashcam video shows terrifying near-miss on two-lane northern Ontario highway
There were some scary moments for several people on a northern Ontario highway caught on video Thursday after a chain reaction following a truck fire.
Average hourly wage in Canada now $34.95: StatCan
Average hourly wages among Canadian employees rose to $34.95 on a year-over-year basis in April, a 4.7 per cent increase, according to a Statistics Canada report released Friday morning.
This iconic Canadian song is turning 50
Andy Kim's 'Rock Me Gently' is marking a major milestone, as it celebrates its 50th anniversary.