![]() On a home selling for $748,450 (the average Canadian home price as of January 2022), a buyer who puts 20% down and takes out a 30-year mortgage at a five-year fixed rate of 2.69% will pay $2,421 a month on their mortgage. That usually gets you a higher purchase price or mortgage amount that’s needed in the big markets,” explains Verceles. ![]() “You’re spreading your debt over five extra years. Signing up for a 30-year mortgage allows a buyer to stretch their mortgage payments over a longer period of time. Thirty-year mortgages can’t be insured by CMHC, which can impact the interest rate on your mortgage, as we explain below. ![]() That means you might be required to have a down payment of as low as 5%, for homes under $500,000, and as high as 20%, for homes valued at $1 million or more.įinally, buyers must have a mortgage or 25 years or less in order to obtain mortgage default insurance from the Canada Mortgage and Housing Corporation (CMHC)-an added fee used to protect mortgage lenders from default. The minimum down payment needed for 25-year mortgages depends on the price of the home there is no strict 20% rule, but the borrower must still meet Canada’s other down payment requirements. All 30-year mortgages are low-ratio mortgages, meaning a buyer must have a down payment of at least 20% to obtain one (mortgages obtained with less than a 20% down payment are called high-ratio mortgages). Mortgages amortized over 30 years are subject to different down payment rules. This means you will have to renew your mortgage several times before the amortization is up. The amount of time your mortgage contract is in effect is called a “term.” Terms can vary from a few months to several years, but they typically won’t be longer than 10 years. 25- versus 30-year mortgagesĪ 30-year mortgage works a little differently than other mortgage products, including those with 25-year amortizations (the number of years it will take to pay off the loan). The principal difference is, of course, the length of the amortization, but you might also be in for more rounds of mortgage renewals. “What I’m finding is that people are doing it just to qualify for they want,” says Micah Verceles, a Vancouver-based mortgage broker.īut what does getting a 30-year mortgage actually mean for buyers? We break it down below. By taking out a 30-year mortgage, buyers can stretch the limits of what they’re able to qualify for and create some extra wiggle room in their budget through smaller mortgage payments. With prices like these, many buyers face mortgage payments that exceed what they can comfortably afford, even with a 25-year mortgage. I'm buying a home I'm renewing/refinancing You will be leaving MoneySense.
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