What do the new shorter amortization periods mean to you?

July 24, 2012 | By

Who said money can’t buy you happiness? Oh yeah, the banks that didn’t want to lend you the money for said “happiness”. Well times are-a-changin’ and so is the tune of that age-old song. Now that the banks have reduced the amortization period for mortgages from 30 years to 25 years, they are essentially marketing a “free indeed, free indeed, thank God almighty I’m free indeed!” debt resolution plan. The idea behind it is well-intentioned I’m sure, with the thought process being that – by bringing all of your financial debts and equities to one institution, it will result in a shorter, and surprisingly -more feasible- outcome.

How can shorter mean more feasible? And is “all your eggs in one basket” such a good idea?

Short term pain for long-term gain essentially. By reducing your mortgage length, this also reduced the amount of interest one would pay over those additional 5 years. In addition, by combining finances from –perhaps- other financial institutions, and conducting all your banking in-house (so to speak), you are enabling these banks to do more with your money is less time.

So yes you might see a slight increase in your mortgage, but a decrease in your debt payments, so it all balances out. Hence – eggs in one basket being a scrumptious idea.

The grand scheme of financial institutions is far beyond the comprehension range of most citizens, so entrusting them with our livelihood and all your financial gains and losses seems like the ultimate scheming at play. However, no matter what, when you’re in the real estate market you have to join the masses who collectively pass “Go”, collect your –insert gains and losses here- and hope that one day someone will land on your boardwalk and you’ll have successfully played the real estate “monopoly game”.

Will the market ever be truly stable? Of course not. Aliens might invade tomorrow. But if they do, it’s unlikely you’ll need to pay back your mortgage. However, the downside to that is – you might need to find a new planet to live on (insert comedic relief here)!

All this to say, embrace change – don’t fear it. Many Canadians are getting up in arms about this change from 30 to 25 year mortgage agenda. It’s a numbers game. Nothing more. Continuing on with your plans to purchase. Utilize a reputable real estate agent, and all things will progress as planned!


Filed in: Buying and Selling Real Estate

About the Author (Author Profile)

Andrew is a West Coast enthusiast through and through. He is a native of the area that you will often find adventuring on one of the many sea to sky activities that abound in the Fraser Valley. Along with being in love with the place he calls home, Andrew is a well known and respected Realtor focusing on helping others to find their own perfect home in Langley, Surrey, White Rock and beyond! Visit www.yourperfecthomebc.ca to find your perfect home.

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