Starting from July 9th, the maximum amortization period will be reduced to 25 years instead of 30 years. The direct effect for this change will be the amount of the monthly payment. The longer a mortgage is spread out, the lower the monthly mortgage payments are — but the more the borrower ends up paying overall over time. Ultimately though, the higher monthly payment saves the borrower money in the long run.
If you are thinking of buying your home with lower monthly payment, then it's better to catch up and puchase it before July 9th. If you are thinking of paying less in the long run, then go with the change.
Below shows you more detail about how these changes would affect one homewner's mortgage payments.
Federal government tightens mortgage rules
On June 21, 2012, Ottawa tightened rules on mortgage lending in the country, reducing the maximum amortization period to 25 years, down from 30.
Here's a visual look at how these changes (effective July 9) would affect one homeowner's mortgage payments using a five per cent sample interest rate.
Sources: Canada Mortgage and Housing Corporation mortgage calculator,
Canadian Real Estate Association, CBCNews.ca
[Infographic by Ruby Buiza/CBC]
By Antiao H