A 30-year mortgage with no rate hikes: Can the U.S. model work in Canada?
Imagine it: You buy a house, and the bank offers you a single rate of interest that will keep your mortgage payments steady for the next 30 years.
Pay it off early if you like, by the way: no big penalties to fear.
And if interest rates drop sharply, you can refinance that loan to take advantage of lower monthly payments!
That’s a (very general) explanation of how the bulk of mortgages work in the United States.
And the federal government just signalled it’s curious about bringing that model to Canada.
The fall economic statement tabled on Monday included a short reference to the idea of making long-term mortgages more widely available in Canada.
Under a section on “lowering the costs of homeownership,” Ottawa said it was “examining the barriers” to making mortgages with terms of up to 30 years available — a way to offer more options to borrowers. The federal government now plans to launch consultations to explore bringing these long-term options to the mortgage market.
But experts tell Global News it’s a model so far unique to the U.S. housing market — some have called it a “Frankenstein’s monster” of a mortgage — and warn bringing such a product to Canada would be no easy task.
On top of that, some say those changes might not make the housing market any more affordable to would-be buyers.
“Most fixed-rate borrowers say they want U.S.-style mortgages… until they see the price tag,” Robert McLister, mortgage strategist with MortgageLogic.news, said in an email.
You might already be familiar with the structure of Canadian mortgages, but here it is in a nutshell.
When a homebuyer applies for a mortgage, the typical process sees them take out a loan to be paid back — or amortized — over 25 years, though Ottawa has recently
Read more on globalnews.ca
