Should You Get A 35 Year Mortgage In Canada?
Planning to buy a house? Want to know whether you should get a 35-year mortgage? Read this blog to find more.
Source: Freepik
The terms mortgage and amortization are often misunderstood. To begin with, it is essential to understand the differences between these phrases as real estate investors. Read on to understand more.
What does Amortization mean?
Amortization is the time it takes you to pay off your mortgage. An amortization is estimated depending on the current terms interest rate.
What are the pros and cons of a 35-year mortgage?
Here are the most substantial advantages and disadvantages of 35-year amortization.
Pros of a 35-year mortgage
Lower Monthly Payment:
As the payment term gets more extensive, your monthly payments are dropped. This makes it possible for you to save up for other expenses and manage your budget.
Offers more flexibility:
This offer is beneficial for you if you cannot afford a shorter term and higher monthly payments. You can even choose to pay off your mortgage if you feel earlier than the set period of your term.
Cons of a 35-year mortgage
Longer to get mortgage-free:
You get to pay your mortgage for a longer time. It means that you might have to work for a longer time to be mortgage-free.
More Interest:
Your mortgage can have fixed or variable interest rates. As the amortization period is getting longer, this means the interest rate is also much more. When you borrow the same amount for a shorter period, you will wind up paying more interest.
Not Offered by “A” Lenders:
If your down payment is less than 20% of the buy price, your most considerable amortization period is 25 years. And for the down payment of more than 20%, the amortization period is 30 years. If you are planning to get a 35-year mortgage, you need to look for an alternative lender. As in the banks and credit unions, the ‘A’ lenders do not offer 35-year mortgages.
Should you get a 35-year mortgage?
If you choose a 35-year mortgage, you may get reduced and predictable monthly payments. You will but be obligated to pay for a more extended period. It could have an impact on your other financial goals. Because banks and credit unions do not offer a 35-year mortgage, you will have to look for another lender that may or may not be able to provide you with a better interest rate. As a result, you will have to pay more than you expected. If you want to get a 35-year mortgage, talk to your mortgage broker about which one best meets your needs and how to get one.
