An Edmonton Journal article asks a valid question, even if the title of the article is a bit misleading…
Turchansky: Do Canadians need 30-year mortgages?
We already have 30-year mortgages in Canada. What the article is actually asking (and what many of the commenters appear to have missed) is if Canada should have 30-year locked-in fixed-rate mortgages (i.e. a mortgage that remains XX% and monthly payments that never change throughout its entire 30 year term).
Edmonton financial adviser Shawn Allen of InvestorsFriend Inc. has been prodding financial writers to lobby financial institutions to offer Canadians an “affordable” 30-year locked-in mortgage, insured and with minimum penalties for refinancing.
Currently, it’s most common to take out a 25 or 30 year mortgage, but with a 5 year term. That means the interest rate (and payments) stay fixed for the next 5 years. But at the end of 5 years, it’s time to renew, and if interest rates have skyrocketed in that time, there could be a staggering increase in monthly payments. A 30-year fixed-rate mortgage may be an attractive option for anyone who plans to stay in a home long-term, and who wants the security of knowing their monthly payment will never go up, from the time they buy the home until it’s completely paid off. What are your thoughts?