As we usher in the new year, it’s the perfect time to set resolutions and look forward to the future. For many, homeownership tops the list of goals and for those considering buying a home this year, one important aspect of financing is the mortgage amortization period.
What is a 30-Year Amortization Period
The introduction of a 30-year amortization period in Canada is a promising benefit for prospective home buyers. Simply put, amortization refers to the length of time over which you repay your mortgage. With a 30-year amortization, home buyers can now extend their mortgage payments over a longer period than the traditional 25 years, making home ownership more accessible.
This extension is available for first-time buyers purchasing either an existing resale home or a new build. For individuals who are not first-time buyers, it is only available for newly built homes. The extension lowers monthly payments which may help prospective buyers balance their mortgage costs alongside other financial obligations. This may be particularly beneficial for those who may not have substantial savings or those looking to invest in higher-value properties.
Jacki Harris, Managing Partner/Mortgage Broker with MMG Mortgages tangibly breaks down how much this can change monthly mortgage payments:
$500,000 Purchase Price
$25,000 Minimum Down Payment
25-Year Amortization – $2,623/month payment
30-Year Amortization – $2,379/month payment
There are several key benefits that make extended amortization periods an appealing choice for those looking to put homeownership within reach this year.
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Lower Monthly Payments for Financial Flexibility
One of the most significant advantages of a 30-year amortization is the reduction in monthly mortgage payments. Lower payments can make a significant difference, especially for individuals or families who are transitioning from renting to owning. It allows them to maintain a comfortable lifestyle while gradually paying off their home.
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More Access to Affordable Properties
With the new 30-year amortization period, home buyers may find that they can afford properties that were previously out of reach. The reduced monthly payments can make higher-priced homes more accessible, allowing buyers to explore a wider range of housing options in more convenient locations or with additional space and amenities.
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Building Equity Over Time
While extending the amortization period means that it will take longer to pay off the mortgage, it also comes with long-term benefits. Over time, homeowners will build equity in their property and as equity builds, homeowners gain more financial leverage and stability. This can be particularly advantageous in the long-term, as equity can be used for future investments or to secure additional financing if needed.
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A Path to Long Term Stability and Predictability
Owning a home with an extended amortization period offers a path to long-term stability that is hard to beat. Unlike renting, where payments can increase year over year, a fixed-rate mortgage with a 30-year term provides predictable payments, allowing homeowners to plan with confidence, knowing that their housing costs will remain consistent.
As you enter the new year, owning a home might be one of your biggest aspirations. From lower monthly payments and financial flexibility to less risk and the potential to access better properties, a 30-year mortgage could be the ideal tool for your journey toward homeownership.
Before taking the leap, it’s important to do your research, shop around for the best mortgage rates, and consult with a financial advisor to ensure that homeownership fits within your overall financial plan. At StreetSide Developments we partner with the best in the industry, that’s why we work with MMG Mortgages for our mortgage approvals. With the right preparation, 2025 could be the year you make your homeownership dreams a reality!