Canadians opting for shorter-term mortgages on hopes interestrates will drop
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Samantha Brookes, founder and chief executive officer of Mortgages of Canada, says that before the Bank of Canada started raising interest rates last year, a five-year term was the norm for most homebuyers, but that’s changed. People are now going shorter in hopes that interest rates will come back down in the coming years.Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.
“You break your mortgage, you have a two-year penalty, but your interest rates are much lower and your payments are more affordable. So that’s why people are going for the shorter term mortgage right now.” The “term” of a fixed-rate mortgage is the length of the contract with a set interest rate on your loan. When the term is up, if you haven’t fully repaid your loan, you will have to renew your mortgage for a new term at the prevailing rates. It is different from the amortization period, which is the total time taken to repay the loan.
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