Your mortgage amortization period is the number of years it will take you to pay off your mortgage. Depending on your choice of amortization period, it will affect how quickly you become mortgage-free as well as how much interest you pay over the lifetime of your mortgage (longer lifetime equals more interest, whereas a shorter lifetime equals less interest but also bigger payments).
Let’s start by looking at the mortgage industry benchmark amortization period. This is typically a 25-year period and is the standard that is used by the majority of lenders when it comes to discussing mortgage products. It is also typically the basis for standard mortgage calculators.
While this is the standard, it is not the only option when it comes to your mortgage amortization. Mortgage amortizations can be as short as 5 years and as long as 50-years(interest-only)!
Opting for a shorter amortization period will result in paying less interest overall during the life of your mortgage. Choosing this amortization schedule means you will also become mortgage-free faster and have access to your home equity sooner! However, if you choose to pay off your mortgage over a shorter time frame, you will have higher payments per month. If your income is irregular, you are at the maximum end of your monthly budget or this is your first home, you may not benefit from a shorter amortization and having more cash flow tied up in your monthly mortgage payments.
When it comes to choosing a longer amortization period, there are still advantages. The first is that you have smaller monthly mortgage payments, which can make home ownership less daunting for first-time buyers as well as free up additional monthly cash flow for other bills or endeavors. A longer amortization also has its advantages when it comes to buying a home as choosing a longer amortization period can often get you into your dream home sooner, due to utilizing standard mortgage payments versus accelerated. In some cases, with your payments happening over a larger period, you may also qualify for a slightly higher value mortgage than a shorter amortization depending on your situation.
I am happy to help with the decision for the amortization that best suits your unique requirements and ensures you have adequate cash flow. However, it is important to mention that you are not stuck with the amortization schedule you choose at the time you get your mortgage. You can shorten or lengthen your amortization, as well as consider making extra payments on your mortgage (if you set up pre-payment options), at a later date.
Ideally, you are re-evaluating your mortgage at renewal time (every 3, 5, or 10 years depending on your mortgage product). During renewal is a great time to review your amortization and payment schedules or make changes if they are no longer working for you.
If you have any questions or are looking to get started on purchasing a home, don’t hesitate to reach out to me today!
Fall in love with your home and your workspace again with these tips to help you make your home office space more productive!
2024-2025 will see about 2.2 million mortgage borrowers renewing, representing 45 percent of outstanding Canadian mortgages.
The effects are not just about higher monthly payments, this will likely produce a ripple effect through the entire housing market.
CMHC estimates that average monthly payments could increase 30-40 percent as mortgages come up for renewal over the next few years.
In September 2021, five-year mortgages fell to a historical low of 1.44% leading to lower monthly payments for many homeowners. Fast forward to this year, however, the average five-year fixed mortgage sits in the mid-6 percent range (lower for homes with equity).
Homeowners who benefited from low mortgage rates during the pandemic may be in for a major shock as their agreements come up for renewal. Depending on the renewal timing, some homeowners may decide to sell rather than renew. This rapid inventory increase could cause more pricing decreases as demand, depending on geography, will have a buyers' market and lead to lower sale prices.
Don't get your hopes up without doing your due diligence, though. Just because the tables are turning in one region, this doesn’t mean the rest of the country will follow suit.
To really understand if Canada is shifting towards a buyer’s market, prospective homebuyers and those expecting to renew their existing mortgages need to watch for telltale signs, such as:
Mortgage renewals can have an impact on the housing market, although the extent of that impact depends on various factors. Here are some ways in which mortgage renewals can affect the housing market:
It's important to note that the relationship between mortgage renewals and the housing market is complex, and various factors, including economic conditions, employment rates, and government policies, also play a significant role. Monitoring economic indicators and staying informed about market trends is crucial for understanding how mortgage renewals may impact the housing market in each period.
We are hoping that the next move is going to be a cut to Bank of Canada lending rates by the government in mid-2024. The government is balancing its fight against inflation with the worries about Canadians impacted by renewals.
For a quote to estimate your options at renewal, do not sign the renewal notice without checking your options. We regularly see people saving 30-50bps on renewal offers, depending on the loan to value of your mortgage at renewal.
Call us for a free quote or email [email protected]!
As we get closer to the end of the year, we have some tips for you about your mortgage renewal, plus how to winterize your home!
Is your mortgage coming up for renewal? Do you know about all the incredible options renewing your mortgage can afford you? If not, I have all the details here on how to make your mortgage renewal work for you as we start to think about 2024.
Are you aware that when you receive notice that your mortgage is coming up for renewal, this is the best time to shop around for a more favorable interest rate? At renewal time, it is easy to shop around or switch lenders for a preferable interest rate as it doesn’t break your mortgage. With interest rates expected to come down as we move into the New Year, taking some time to reach out to me and shopping the market could help save you money!
Renewal time is also a great time to take a look at your existing debt and determine whether or not you want to consolidate it onto your mortgage. For some, this means consolidating your holiday credit card debt into your mortgage, for others it could be car loans, education, etc. Regardless of the type of debt, consolidating into your mortgage allows for one easy payment instead of juggling multiple loans. Plus, in most cases, the interest rate on your mortgage is less than you would be charged with credit card companies.
Do you have projects around the house you’ve been dying to get started on? Renewal time is a great opportunity for you to look at utilizing some of your home equity to help with home renovations so you can finally have that dream kitchen and updated bathroom, OR you can even utilize it to purchase a vacation property!
Are you not happy with your existing mortgage product? Perhaps you’re finding that your variable-rate or adjustable-rate mortgages are fluctuating too much and you want to lock in! Alternatively, maybe you want to switch to variable as interest rates start to level out. You can also utilize your renewal time to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!
Not happy with your current lender? Perhaps a different bank has a lower rate or a mortgage product with terms that better suit your needs. A mortgage renewal is a great time to switch to a different bank or credit union to ensure that you are getting the value you want out of your mortgage if you are finding that your needs are not currently being met.
Regardless of how you feel about your current mortgage and what changes you may want to make, if your mortgage is coming up for renewal or is ready for renewal, please don’t hesitate to reach out to me! I’d be happy to discuss your situation and review any changes that would be beneficial for you to reach your goals; from shopping for new rates or utilizing that equity! I can help you find the best option for where you are at in your life now and help you to ensure future financial success.
We Canadians are no strangers to the chill of the winter season! As we shift into the final few months of 2023, now is a great time to check your home before the cold front hits. Below I have included a few tips that could help you save on bills, prevent future repair costs, and be more comfortable all winter long.
With a little preparation, you can keep your home in good shape without needing to feel the cold bite of winter!
This month let’s talk about the Fall market, plus I have some spooktacular home tips to help you through the season.
As we round the corner into October, now is a great time to touch base about what to expect in the marketplace this Fall!
As you may have heard, The Bank of Canada opted to maintain its policy rate at 5% as of September. The recent rate hikes over the spring and summer have slowed the housing and mortgage markets as potential buyers were unsurprisingly spooked by the rise in mortgage rates. More recently, fixed-rate loans have become more expensive because of the rise in longer-term interest rates. As a result, housing affordability became a bigger hurdle and led to a slight decrease in home prices by 6% in major markets over the summer.
With The Bank of Canada currently maintaining the 5% policy rate, many hope this will be the peak in overnight rate changes. If so, homeowners and potential buyers will be granted some breathing room. We will find out more with their upcoming announcement on October 25th.
As we turn the corner into Fall and start looking ahead to the coming year, analysts are forecasting stronger housing markets. The expectation is that The Bank of Canada will gradually cut interest rates by mid-year, allowing potential buyers to better navigate their affordability.
As the housing supply shortage continues, new listings are likely to rise and provide much-needed new inventory. As we move into 2024 and start to see interest rates decrease, motivated sellers will move off the sidelines and housing demand is expected to be resilient.
For anyone who is thinking about purchasing this season, it is important to get pre-approved to guarantee your interest rate for 90-120 days while you shop the market. This way, you will avoid being impacted by potential rate changes and can properly estimate your budget for mortgage costs. Plus, pre-approval will indicate to the seller that you will not have issues obtaining financing (assuming nothing changes between now and the purchase with your job, savings, etc.), which is key during the current economic landscape.
To help you make the best decision possible, download the My Mortgage Planner app to determine what you can afford, and what your mortgage would look like at various interest rate levels.
I am also here to provide expert, unbiased advice to anyone with concerns, questions, or wants to get started on their pre-approval today!
It is hard to believe it is October already! Even though Fall has already started, there are a few things you can do still to ensure your home is well-prepared for the season:
Whatever your plans this season, a quick check of your home will ensure there are no surprises!
This month we are covering what you need to know about condition-free offers, plus since the kids are headed back to school, now is a great time to teach them about money.
When it comes to purchasing a home, most offers include “conditions” (or “subjects” if you are in the provinces of British Columbia or Manitoba), which are requirements or criteria to be met before the sale can be finalized and the property is transferred.
Some of the most common conditions include:
The purpose of these conditions is to protect the buyer from making a poor investment and ensure that there are no hidden surprises when it comes to financing, insurance, or the state of the property.
These conditions are written up in the purchase offer with a date of removal. This is agreed to by the seller before the sale is finalized. Assuming the conditions are lifted by the date of removal, the sale can go through. If the conditions are not lifted (perhaps financing falls through or something is revealed during the home inspection), the buyer can waive the offer and the purchase becomes void.
In some cases, homebuyers choose to approach an offer without conditions. Below we have outlined the impact of what this means for buyers and sellers to help you better understand the risks and outcomes:
When submitting a condition-free offer, it is essentially up to the buyer to do as much due diligence as possible before submitting. They will need to identify what the lender is looking for to make sure they walk away with a mortgage. Though approval is never certain, prospective buyers placing a condition-free offer should do their very best to secure financing beforehand.
Be mindful when it comes to purchasing offers versus purchase agreements. While your purchase offer is a written proposal to purchase, the purchase agreement is a full contract between the buyer and seller. The purchase offer acts as a letter of intent, setting the terms you propose to buy the home. If financing falls through, for example, then the contract is breached and this is where the buyer may lose the deposit.
It is also important to be aware of a breach of contract in the event that a seller chooses to take action. For example, if you submit a condition-free offer of $500,000 and cannot secure financing for that offer and the seller turns around and is only able to get a $400,000 deal with another buyer, they could potentially sue the initial buyer for the difference due to breach of contract.
If you have decided to go ahead with a condition-free offer, regardless of the risks, there are some things you can do to mitigate potential issues, including:
While there are things that can be done to help with condition-free offers, it is still risky. Ultimately submitting an offer with conditions gives you the time and ability to gather information on the above, as well as access to the property or home for inspections.
If you are intent on submitting a condition-free offer, be sure to discuss it with your real estate agent as they can determine if a condition-free offer is necessary, or if perhaps a short closing window would suffice to seal the deal. A good realtor will keep you informed of potential interest and other bids during the process as well. Their goal should be to maximize your opportunity and minimize your risk. In addition, before making any offers, be sure to contact me to discuss your mortgage and financing so you can make the best decision.
Financial independence is a critical skill for future success that your children will not learn anywhere else. Not only does financial literacy help your children have more success in life, but it allows them to move out sooner and it avoids delaying your retirement with additional expenses to support them.
So, how do you teach your children about money?
Remember, you are the best example to your children about money. Don’t be afraid to share the ups and downs with them. Be patient with your kids, but don’t give up!
The best thing you can do as a parent is to promote financial security and independence.
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