90-year mortgage amortizations are a myth, but soaring payments are a reality

financialpost.com:

Rising interest rates have been putting increased pressure on variable-rate mortgage borrowers, in some cases pushing out their amortization periods by decades — at least on paper. But are people really being given 70, 80 or even 90 years to pay off their homes? The Financial Post’s Ian Vandaelle explains what you need to know about extended amortizations and how rising interest rates are affecting mortgages.

Essentially, your mortgage and the amortization period are two different ways to look at a path to the same destination. Your five-year mortgage is a contract that sets the interest rate you’ve agreed upon with your bank for the next five years. But very few people are able to pay the full cost of a home in that short a period of time. That’s where the amortization period comes in — that’s how long it would take to pay off your mortgage in full, at the pace you’ve chosen. Typically, the amortization period is 25 years in Canada, a figure that’s a mandatory cap if you have a down payment of less than 20 per cent.

While homebuyers can choose shorter amortization periods, which come with higher monthly payments, Canadian lenders typically do not offer amortizations of greater than 30 years, even for those with 20-per-cent down payments. The 25-year amortization thus remains the norm.

When it comes to mortgage contracts, on the other hand, five years has been the standard, meaning you renegotiate your interest rate with your lender every half-decade. If you stick to your original amortization schedule and interest rates didn’t change, you would go through five five-year mortgages — covering 25 years — before paying off the home in full.

However, at each renegotiation, you can also tinker with the amortization period,