Amortization extensions open questions about home affordability
Amortization extensions open questions about home affordability
A for sale sign displays a sold home in a development in Ottawa on July 6, 2015. THE CANADIAN PRESS/Sean Kilpatrick
With interest rates up 3.5 percentage points this year, and Bank of Canada poised for more rate hikes in coming months, more homeowners are seeking longer amortization periods in an effort to avoid defaulting and make their monthly payments more affordable.
But some industry experts warn that increasing amortization periods is only a Band-Aid solution for a much deeper financial wound — one that more time won’t necessarily heal.
Max Rafael, a mortgage agent for clients throughout Ontario, believes it’s imperative for home buyers and owners to not be “short-sighted” when it comes to dealing with rates.
“Not just when purchasing and getting a new rate but also when you’re in the middle of a variable term rate, which is something that a lot of people are dealing with right now,” he said in a phone interview with CTVNews.ca on Tuesday.
“Obviously telling a client whose payment could have doubled or even tripled over the last year to just wait it out another year is very challenging,” he said. “Not everyone is in a financial position to really do that.”
As the Financial Consumer Agency of Canada explains, the longer your amortization period, the lower your payments will be. But when you take longer to pay off your mortgage, you pay more in interest.
According to CIBC’s Q4 earnings release, CIBC saw its amortizations soar following the fourth quarter, with a third of its mortgage portfolio having variable rates. The bank also reported that 26 per cent of CIBC’s residential mortgage portfolio now has a amortization approvals of 35 years or longer.
Similarly, TD reported that 25.2 per cent of its mortgage portfolio now has amortizations of 35 years.
Extending your amortization, Rafael said, is effectively saying that if you make your monthly payment over a longer period of time you can handle increasing costs.
Rafael calls amortization the “life of your mortgage.”
“If you’re on a thirty year amortization, that’s basically saying that if you make your monthly payment every month for 30 years, after you’ll be mortgage free.”
The longest amortization a borrower is allowed under federal law is 25 years if their down payment is less than 20 per cent, but borrowers can get much longer amortization periods if they put down at least 20 per cent.
“You really need to look in the mirror and say, ‘can I really afford this place?’ Forty years is a really long time to be paying off a mortgage. Where do we draw the line?” Rafael said.
Stress testing and qualifying rates, Rafael added, protects buyers and clients from signing housing contracts that they may not really be able to afford in the long-run.
This is especially the case for buyers on fixed incomes.
“If rates go up two per cent and you’re a salaried employee you have no other source of income. What are those people going to do if rates go up two per cent, which we saw happen this year? A lot of those people are struggling right now.”
Paid subscriptions to on-demand care are among the many strategies primary health-care providers in Ontario are adopting in order to meet increased demand for access to doctors in the past year, while also managing staffing shortages.
Justice Minister David Lametti says he will "look at" a federal policy that restricts gay and bisexual men from donating to sperm banks in Canada, after CTV News exclusively reported on Wednesday that a gay man is taking the federal government to court over it.
The federal government is seeking to delay the extension of assisted dying eligibility to people whose sole condition is a mental disorder until March 17, 2024. Justice Minister David Lametti introduced a bill seeking the extension in the House of Commons on Thursday.
Nestle Canada says it is winding down its frozen meals and pizza business in Canada over the next six months. The four brands that will no longer be sold in the freezer aisle at Canadian grocery stores are Delissio, Stouffer's, Lean Cuisine and Life Cuisine.
Will we see six more weeks of winter, or an early spring? Here’s what some of the groundhogs (and one human) have predicted so far, from coast-to-coast.
A former 'Dances With Wolves' actor accused of sexually abusing Indigenous girls and leading a cult must remain held without bail until his next court hearing, a judge ordered Thursday morning.
The United States has answered President Volodymyr Zelenskyy's plea for rockets that can strike deep behind the front lines of the nearly year-long conflict with Russia. Now Russian forces will need to adapt or face potentially catastrophic losses.
A former commander of Russia's Wagner mercenary group who fled to Norway told Reuters he wanted to apologize for fighting in Ukraine and was speaking out to bring the perpetrators of crimes to justice.
As rates of sexual assault climb across Canada, nursing experts say there is a shortage of specially trained forensic nurses to properly care for victims.
In Canada, Medical Assistance in Dying is changing. In 2023, people who have a mental disorder as their sole underlying medical condition will become eligible for an assisted death. Originally, that was scheduled to happen on March 17, but the government has asked for a delay. CTVNews.ca/W5 outlines 9 things you need to know about MAiD.
On CTVNews.ca/W5: Executive Producer Derek Miller highlights an example of a W5 mini investigation that never made it to air, but made a difference in someone's life nonetheless.
On CTVNews.ca/W5: Executive Producer Derek Miller highlights some of W5's upcoming investigations, including Mexico's multi-billion dollar avocado industry run by cartels, and a continuing look into the Pivot Airlines passengers and crew who were detained for months without charges in the Dominican Republic.
The five-member Pivot Airlines crew, who had been detained in the Dominican Republic for almost eight months, is now back in Canada. An emotional airport reunion took place in a special pre-arrivals area of Toronto Pearson International Airport, as the two flight attendants, pilot, co-pilot and mechanic were greeted by family.
W5 speaks with Pivot Airlines flight attendant Christina Carello, who reveals new details about how she uncovered key evidence that had been tampered with in a nightmare ordeal in the Dominican Republic.
CTV's W5 has been shown never-before-seen surveillance footage of Punta Cana International Airport from the night before a Canadian airline crew was detained after discovering duffel bags stuffed with 210 kilograms of cocaine in their plane's avionics bay.
Hundreds of customers who scan QR codes for restaurant menus across Canada are being surprised by secret menus instead, revealing the hidden costs behind the food they eat.
Bylaw Services officers issued 9,217 tickets for violating the winter weather parking bans in January, resulting in more than $960,000 in fines for drivers.
Convicted pedophile Shayne Lund, now 31, revealed he is recently married and took part in a day and full parole review in a videoconference hearing Thursday from the Ottawa area.
One person has died after a two-vehicle crash in south London Wednesday night. Police were called to the scene on Bostwick Road around 7:20 p.m. and say there were five people injured in total and all five were taken to the hospital with injuries ranging from serious to life-threatening.
Manslaughter and drug trafficking charges have been laid in connection to the overdose death of an individual in 2021, according to police in Saugeen Shores.
Environment Canada has issued a snow squall watch fr the London region Thursday evening. This comes as the Middlesex-London Health Unit (MLHU) has issued its first cold weather alert of the year.
The next few nights are expected to be frigid in Montreal, with wind chill factors dropping to -30. In order to prevent anyone experiencing homelessness from ending up outdoors, the City of Montreal is announcing the opening of two emergency shelters.
After an extremely mild month of January, the province is bracing for a blast of arctic air that will move in tonight and last until Saturday. Environment and Climate Change Canada has issued extreme cold warnings that covers most of the province with wind chills expected to be between -38 and -42 across the South and -50 across Northern Quebec.
On the day that Shubenacadie Sam predicted six more weeks of winter, there are extreme cold warnings cautioning that the coldest air of the season is about to arrive in the Maritimes.
A Manitoba judge is being asked to decide whether Premier Heather Stefanson violated conflict of interest rules, as alleged by the leader of Manitoba's Liberal Party.
The son of Jim Carr, the Liberal member of Parliament who died last year, is seeking the party's nomination to run for his father's seat in an upcoming byelection.
A former 'Dances With Wolves' actor accused of sexually abusing Indigenous girls and leading a cult must remain held without bail until his next court hearing, a judge ordered Thursday morning.
Four people in their 30s have now been charged with robbing a pawn shop in south Edmonton, while police work to determine if one of the accused also shot two workers at another store in December.
Three people have been charged after more than $400,000 in drugs and cash were seized from two homes and a vehicle after a seven-month-long investigation in Edmonton.
The first of 15 new battery-electric buses is hitting the streets in Metro Vancouver, as part of TransLink's overall strategy to reduce greenhouse gas emissions.
Mounties are warning the public about the risks of arranging encounters with people online after a man was assaulted and robbed at a Kamloops, B.C., motel over the weekend.
Justice Minister David Lametti says he will "look at" a federal policy that restricts gay and bisexual men from donating to sperm banks in Canada, after CTV News exclusively reported on Wednesday that a gay man is taking the federal government to court over it.
The federal government is seeking to delay the extension of assisted dying eligibility to people whose sole condition is a mental disorder until March 17, 2024. Justice Minister David Lametti introduced a bill seeking the extension in the House of Commons on Thursday.
Canada's justice minister accused Pierre Poilievre's Conservatives Thursday of using tragedies such as the killing of a young Ontario Provincial Police officer 'to try to score political points.'
On CTVNews.ca and YouTube: Health journalist Avis Favaro joins our Trend Line podcast, for an in-depth episode dedicated to the growing crises facing the Canadian health-care system.
Ontario fully supports the federal government's push to make health-care funding contingent on data reporting, the province said Thursday as it announced a plan to boost access to primary care doctors.
Paid subscriptions to on-demand care are among the many strategies primary health-care providers in Ontario are adopting in order to meet increased demand for access to doctors in the past year, while also managing staffing shortages.
After a tiny radioactive capsule went missing in the Australian outback, an expert in Canada says the likelihood of the same happening in this country is unlikely, given our strong regulations governing the handling of radioactive materials.
Chinese scientists have successfully cloned three 'super cows' that can produce an unusually high amount of milk, state media reported, hailing it as a breakthrough for China's dairy industry to reduce its dependence on imported breeds.
An archeological team from Saint Mary's University will travel to France this summer to use ground-penetrating radar and other technology to assist a United States defence agency recover and identify military personnel missing since the Second World War.
A former 'Dances With Wolves' actor accused of sexually abusing Indigenous girls and leading a cult must remain held without bail until his next court hearing, a judge ordered Thursday morning.
It's been six years since Bruce Springsteen and the E Street Band embarked on a major tour. But judging by the first show Wednesday night in Tampa, Florida, you'd never know it.
Nestle Canada says it is winding down its frozen meals and pizza business in Canada over the next six months. The four brands that will no longer be sold in the freezer aisle at Canadian grocery stores are Delissio, Stouffer's, Lean Cuisine and Life Cuisine.
As Black History Month gets underway, Canada Post has unveiled a new stamp honouring Chloe Cooley, a young Black woman who was known to challenge her enslavement in the late 18th century.
The rising demand for ayahuasca has led to hundreds of psychedelic churches in the U.S., which advocates say are protected from prosecution by a 2006 U.S. Supreme Court ruling.
A group of boys who fled the war in Ukraine arrived in Quebec City Wednesday for a hockey tournament that brings players together from around the world.
John Herdman is staying put. After a morning of speculation fuelled by a New Zealand report that the Canada men's soccer coach had agreed to take over the 105th-ranked All Whites, Herdman and Canada Soccer put out the fire with a statement Wednesday.
Calgary's Scotiabank Saddledome was packed to the rafters with fans eager to take a look at Canadian phenom Connor Bedard and the 17-year-old did not fail to impress.
A good winter tire will always outperform an all-season tire in snowy, icy driving conditions and be the safer alternative. Edmunds' experts explain the importance of winter tires and offer advice on when to use them and how much you should pay.
The U.S. Justice Department has requested documents from Tesla related to its Autopilot and 'Full Self-Driving' features, according to a regulatory filing.
Europe is taking another big step toward cutting its energy ties with Russia, banning imports of diesel fuel and other products made from crude oil in Russian refineries. The European Union ban takes effect Feb. 5 following its embargo on coal and most oil from Russia.
A for sale sign displays a sold home in a development in Ottawa on July 6, 2015. THE CANADIAN PRESS/Sean Kilpatrick
