Why longer amortization may start trending

When the new tighter restrictions on mortgage lending come into effect in just over two months they could spark a new trend – longer amortizations.

With OSFI’s stress test requiring borrowers of uninsured mortgages to prove they can afford payments 2% above their contract rate, fewer people will qualify.

However, switching to a longer amortization period could help offset the restriction says Ratespy.com founder Rob McLister. He told the Financial Post that the lower payments from a 35-year period compared to 25 years could enable qualification but noted that interest rates would be higher.

OSFI responded that, while it has not included amortization as part of the updated B-20 Guideline, it would be “monitoring” regulated lenders as the new rules are implemented in January.

Mortgage lenders may choose not to try to circumvent the tighter rules fearing that the regulator may intensify scrutiny.

Meanwhile, comments from the chief executive of the Canadian Credit Union Association says the rule changes will hamper competition in the mortgage market.

Martha Durdin told the Globe and Mail that the stress test will make it harder for existing homeowners to shop around for a new deal as they may not qualify for a new mortgage.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

Market update:

Get help choosing the best mortgage rate

Just fill in a few details, and we'll arrange for a Mortgage adviser to help you find the best mortgage for your needs

  • How soon do you want a mortgage?
  • Name
  • Where do you live?
  • Phone number
  • E-mail address

Industry news

Submit a press release

Poll

Do you invest in commercial properties?