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35 year mortgage amortizations are still available

35 year mortgage amortizations are still available

35Prior to the recession of 2008-09, mortgage insurers and lenders were tripping over themselves in an effort to make housing affordable. The combination of slacker underwriting guidelines, historically low interest rates, and amortization periods up to forty years were an intoxicating elixir.

To everyone’s relief, Canada’s real estate market merely hiccupped for a few months, while around the world, the reverberations were merciless. In an effort to preserve our banking system’s newly earned pristine image, over the next few years our Minister of Finance implemented a number of changes to mortgage lending guidelines.

In particular, by the summer of 2012, the maximum allowable amortization period for a high ratio mortgage shrunk back to 25%. Still, with a loan to value (LTV) ratio of less than 80%, a borrower could request a 30 year am.

One reason you may wish to deal with a mortgage agent is we have access to a few strong, reputable lenders who will offer a 35 year amortization to low LTV clients. (LTV less than or equal to 80%) That’s not something you will be offered at your local bank.

As Rob McLister of Canadian Mortgage Trends says “They’re best suited to folks who can afford a home with a shorter amortization, but who prefer lower payments so they can divert cash to better uses.”

Let’s vary the amortization period on a five year fixed rate mortgage at 2.89%
:

Mortgage Amount 25 year am 30 year am 35 year am
$300,000 $1,420.39 $1,262.98 $1,153.19
$500,000 $,2338.10 $2,073.86 $1,888.92

You can clearly see the sizeable impact the selection of amortization period can have on your monthly mortgage payment. This is a good example of just one of the factors to consider when choosing your mortgage.

Related Article: How to manage debt, savings, and your mortgage all at once

Related Article: Lump sum prepayment will not lower your mortgage payment

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