5 hours ago
Extending the amortization period of a mortgage could help control monthly payments.
The amortization period is the period during which the loan is repaid. (Photo: The Canadian Press)
Ottawa — Canadian homeowners could be in shock when it comes time to renew their mortgage, as rising interest rates will likely also lead to higher monthly payments.
These payment hikes are particularly unwelcome since rising prices for gas, groceries and other basics are already eating away at household budgets.
Experts believe that extending the amortization period of a mortgage could help control monthly payments, even if interest rates are higher. But beware: such a decision has a cost since it increases interest costs, which are paid over a longer period.
Mike Rocha, director of mortgage experience at Scotiabank, points out that customers renewing today who may have gotten interest rates below 3% or even 2% in the past face at rates that could potentially reach more than 4%.
“There is definitely going to be a potential payment shock with some customers,” he points out.
The amortization period is the period during which the loan is repaid. This means that for a mortgage taken out five years ago to buy a house with an amortization period of 25 years, there are 20 years of payments left.
By extending this amortization period upon mortgage renewal, it is possible to take the remaining balance on the loan and pay it off over a further 25 years, or even longer, depending on the situation. This decision would reduce the monthly payment, but in…
The Canadian PressLesaffaires.ComAFP and Canadian PressAFP and The Canadian Press
Read the whole article
–
