There are lots of ways Canadians are trying to save money on their mortgages. Just two days ago we told you about how more Canadians are choosing the budget-friendly fixed rate over the variable rate, which is thought will be going up quite soon. But now, we’re finding yet one more way to save money on our mortgages, and that’s by choosing shorter amortization periods.
This is shown through the results of a poll taken by BMO. That study showed that overall, 50% of Canadians would choose a shorter amortization period, while 63% of those that are married with children are more likely to choose the shorter amortization in order to pay off their mortgage faster. In addition to the marital status of Canadians, it would also found that those with Calgary mortgages and other Alberta mortgages are the most likely to pick a shorter amortization, with 61% of residents in this province agreeing that they would do so. Those with mortgages in Ontario, such as Toronto mortgages, come in second with 53% of homeowners here saying they’d choose a shorter amortization. Quebec had 45% of respondents saying the same, while the Prairies were least likely to choose a shorter amortization, with only 32% respondents agreeing.
Katie Archdekin, Head of Mortgage Products at BMO said, “These numbers show Canadian homeowners are choosing responsible home financing options and are making building equity and saving on interest a cost priority. For example, on a $400,000 mortgage at a 5 per cent interest rate, moving from a 30-year to a 25-year amortization can save upwards of $70,000 in interest over the life of the mortgage, which is compelling.”
Doug Porter, Deputy Chief Economist at BMO also chimed in on the subject saying, “Our interest rate outlook now projects that fixed mortgage rates will trump variable. While the decision ultimately depends on the individual, the low rate combined with a shorter 25-year amortization will significantly strengthen household financial stability.”
While releasing the report, BMO also took the time to explain the advantages of a shorter amortization period to Canadians. Of course, not only does this save on the interest homeowners would be paying on the extra five years, it also allows homeowners to build equity in their home faster. With larger monthly payments, more principal is paid every month and so, more equity is built up in the home.
Just another reason to choose a shorter amortization!
