TITOOO wrote: Scared of the housing bubble they said didn’t exist and worried about runaway consumer debt they helped create, the feds last summer decreed mortgage insurance would no longer be available for mortgages longer than 25 years. That helped start the great deflate now leaking the real estate gasbag. First-time buyers were creamed and the condo market nailed. However, the banks did not play nice with a finance minister they now see as a meddling twit. Instead of just shelving 30-year loans, they’ve kept offering them, advertising them and writing them. The only wrinkle: to qualify you need 20% down, bypassing mortgage insurance.
For example, over at RBC, our largest bank, 30-year amortizations are showcased. “A longer amortization provides you lower monthly payments and because of this it is appealing to many people,” it says. “However, it does mean that more interest will be paid over the life of the mortgage and you will build the equity in your home at a slower pace.” You bet it does. The effect of shoving debt further into the future is dramatic. And it’s ballooning of credit which has Ottawa ready to take some drastic action. For example, even on a teensy $150,000 mortgage at 4% over a five year term, extending a 25-year am to 30 years increases the interest shelled out from $86,707 to $106,779 – an increase of 23%, in return for a monthly payment lower by less than eighty bucks. So today, every one of the Big Six banks continues to thumb its profitable nose at the feds, merrily penning 30-year deals. In fact a few lenders, like Vancity, HCT, Coast Capital and Laurentian Bank even have 35-year loans available.