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First if all I love Canada. My father and love of my life wife, are from there. If it wasn't for Canada I would never have been born or married the most wonderful woman in the world. I do not mean this as a criticism, so Canada Defense League please stand down. We are visiting my wife's family and decided, just for fun, to look at a model home in the Niagara Region in Ontario. Its a bungalow with 1700 sq ft, plus 1100 in the finished basement and many upgrades. I guessed the price at just north of 450k. I was over 250k too low. It was an OK house but nothing special IMHO (I may be jaded by what you can get in Florida for that same amount). Houses in Canada are expensive relative to the USA from my experience (not a criticism but an observation).
From what I understand the longest mortgage you can get here is a 10 year fixed rate and after that the rate can fluctuate. I also understand that the most popular term is 5 years. The amortization is 30-35 years. Isn't there a lot of uncertainty not knowing how much the rate and monthly payments will be over the long term? Is the amount of increase capped?
I just realized I misunderstood your question re length of a rate period. Yes, it's 10 years as far as I know. Amortization is now 25 years max, used to be 30.
Yes it causes anxiety. No caps on the increase, but realistically the interest rate doesn't go up more than fractions of a point per year in recent history. No there's nothing you can do about it. I remember my parents hopping six month to six month mortgages back when interest rates were in the 20's.
Unlike the US, you don't by points or have ridiculous closing costs. To originate and fund a mortgage is usually covered entirely by the bank, not requiring several thousand dollars out of your pocket to make it happen.
Yes it causes anxiety. No caps on the increase, but realistically the interest rate doesn't go up more than fractions of a point per year in recent history. No there's nothing you can do about it. I remember my parents hopping six month to six month mortgages back when interest rates were in the 20's.
Unlike the US, you don't by points or have ridiculous closing costs. To originate and fund a mortgage is usually covered entirely by the bank, not requiring several thousand dollars out of your pocket to make it happen.
You can also shop around when your term is up. A bank wants to keep you as a customer so if you can find a cheaper rate, they will match it.
Of course, the only concern would be if what happened in the past when rates sky-rocketed and people were screwed.
First if all I love Canada. My father and love of my life wife, are from there. If it wasn't for Canada I would never have been born or married the most wonderful woman in the world. I do not mean this as a criticism, so Canada Defense League please stand down. We are visiting my wife's family and decided, just for fun, to look at a model home in the Niagara Region in Ontario. Its a bungalow with 1700 sq ft, plus 1100 in the finished basement and many upgrades. I guessed the price at just north of 450k. I was over 250k too low. It was an OK house but nothing special IMHO (I may be jaded by what you can get in Florida for that same amount). Houses in Canada are expensive relative to the USA from my experience (not a criticism but an observation).
From what I understand the longest mortgage you can get here is a 10 year fixed rate and after that the rate can fluctuate. I also understand that the most popular term is 5 years. The amortization is 30-35 years. Isn't there a lot of uncertainty not knowing how much the rate and monthly payments will be over the long term? Is the amount of increase capped?
There are some good questions here; I've had some of the same ones, looking at housing in Canada. How do people pay off a mortgage in 5 years?
But one thing I noticed, is that the vast majority of houses in urban areas seem to have nicely finished basements that are potential rental units, to help with the mortgage. If you compare Vancouver RE with Seattle, for example, the majority of Seattle homes don't have nicely finished basements, or a rental unit in the house, somewhere. Some of that is a zoning issue, and is probably changing. But still, it means in. way, you get more for your money in Van, but you also pay more for the house. But the higher prices in Van are due in part to foreign investment, as we know. Now that the tax laws have been changed to discourage that, the phenomenon has now moved to the Seattle market, so that probably sooner rather than later, Seattle RE prices will catch up to Van. Still not many beautifully finished basements or rental units, though.
There are some good questions here; I've had some of the same ones, looking at housing in Canada. How do people pay off a mortgage in 5 years?
But one thing I noticed, is that the vast majority of houses in urban areas seem to have nicely finished basements that are potential rental units, to help with the mortgage. If you compare Vancouver RE with Seattle, for example, the majority of Seattle homes don't have nicely finished basements, or a rental unit in the house, somewhere. Some of that is a zoning issue, and is probably changing. But still, it means in. way, you get more for your money in Van, but you also pay more for the house. But the higher prices in Van are due in part to foreign investment, as we know. Now that the tax laws have been changed to discourage that, the phenomenon has now moved to the Seattle market, so that probably sooner rather than later, Seattle RE prices will catch up to Van. Still not many beautifully finished basements or rental units, though.
They don't.
The term of the mortgage with a particular lender may be five years, or six months, depending on what you decide...up to 10 years I believe. You can also get a variable rate mortgage, more risk. The amortization of the mortgage is usually 25 years.
After your term is up, you can either pay off the remainder without penalty. Unlikely for most people. Or, renegotiate a new term, and even change lenders if someone offers you a better rate. Many pit lenders against each other vying for your business.
As I said, the risk is not knowing what the rate will be in 15 years, but there are all sorts of ways of getting the principal down, like bi-weekly payments instead of monthly.
It must work well overall, since Canadians home ownership is extremely high. Some of the lending rules have changed recently, being stricter on the calculations of what people can afford ( Canada was always fairly strict, that's why we didn't have the issue like in the US where people got mortgages they couldn't afford ) so it will be interesting to see how these new changes affect home ownership.
Very few people expect to do so. Every 5 years they renew the remaining mortgage, locking in a new mortgage rate applicable for the next 5 years. So over the course of 25 years they have paid 5 different interest rates.
People tend to spend the maximum they can afford on a new home based on their savings and current salaries. That’s a bad strategy when inflation and interest rates are low.
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