Is it possible to have a mortgage for longer than 25 years?
Last spring, Canada Mortgage and Housing Corporation (CMHC) and Genworth Financial both announced that they would insure mortgages for longer than the traditional 25 years.
The blessing is that the longer amortization will give greater affordability to Homebuyers to get into the real estate market sooner or afford a more expensive house.
On the curse side, the premium of the insurance cost is slightly increased ranging from an additional 0.2 to 0.4 and it will be longer to pay off that mortgage in full… keeping in mind that you can reduce this amortization by paying on a weekly or bi-weekly accelerated payment schedule or prepaying a lump sum of money from time to time.
If you look at inflation rate over the last decade and the increase of real estate values in Canada over the same period, it clearly demonstrates that owning real estate has by far outpaced the inflation and return that most Canadians have received on their investment either in GIC’s, term deposit, mutual funds or stock market.
Although it does prolong the duration of your payment of your home, we notice that in other countries such as the U.S. as well as in Europe, they have been offering extended amortizations for many years, and have also enjoyed lucrative home ownership.
The ultimate decision is left to the homebuyers and if they are well informed on the products and options they will make appropriate choices. Housing in Canada is a great way to stimulate the economy.
I have been a Mortgage Broker for more than 25 years and I am of the opinion that the more options available to the consumers the better.
Guy R. Gauthier