Personal Finance

correct me if I'm wrong, mortgage 25yr vs 30yr

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Deal Addict
Oct 11, 2010
1013 posts
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Charlottetown

correct me if I'm wrong, mortgage 25yr vs 30yr

It's my understanding that in Canada I can get a 30yr mortgage assuming I have 20% down (no CHMC). I understand that with a 25 year mortgage the payment is higher than a 30 and with a 30yr you end up paying quite a bit more interest. However, my thinking is that I'd like to take out a 30yr mortgage but then willingly increase the mortgage payment amount to that of the 25yr rate which gives me more flexibility down the road because if we ran in to money problems I have the ability to reduce the payment back to the original 30yr base payment. Is there any downsides to using a method like this assuming the increased payment is done for the majority of the mortgage?

Essentially I'm wondering if it's best to go with the lowest possible mortgage payment but be vigilant on increasing the payment to lower the amortization period as I see fit?
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Deal Expert
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Oct 26, 2003
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pretty sure 25 year is the max, not that the monthly payment would differ by much between 25 and 30 years
Deal Addict
Oct 11, 2010
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Charlottetown
I'm pretty sure that 25 is the max with CMHC but you can go as high as 35yr without CMHC (depending on the lender). I could be wrong but I'm pretty sure
Deal Expert
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Oct 26, 2003
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^yeah but you are stretching yourself pretty thin there
Deal Addict
Oct 11, 2010
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divx wrote: ^yeah but you are stretching yourself pretty thin there
how is that stretching? I can easily afford a 25yr mortgage but with a 30yr I get the "option" of lower payments if I was in a bind
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Oct 26, 2003
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^you really want a mortgage for 35 years? that's almost your entire working life
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Feb 2, 2011
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jfall wrote: It's my understanding that in Canada I can get a 30yr mortgage assuming I have 20% down (no CHMC). I understand that with a 25 year mortgage the payment is higher than a 30 and with a 30yr you end up paying quite a bit more interest. However, my thinking is that I'd like to take out a 30yr mortgage but then willingly increase the mortgage payment amount to that of the 25yr rate which gives me more flexibility down the road because if we ran in to money problems I have the ability to reduce the payment back to the original 30yr base payment. Is there any downsides to using a method like this assuming the increased payment is done for the majority of the mortgage?

Essentially I'm wondering if it's best to go with the lowest possible mortgage payment but be vigilant on increasing the payment to lower the amortization period as I see fit?
I have a 40 year mortgage. It was available during the time I purchased in 2008. I didn't do 40 years because I couldn't afford 25, I did it just for flexibility reasons. I used prepayments to pay it off quicker. I'm looking at about just under a year to finish paying my mortgage. So 40 mortgage turn into 7 years or so.
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May 11, 2008
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jfall wrote: It's my understanding that in Canada I can get a 30yr mortgage assuming I have 20% down (no CHMC). I understand that with a 25 year mortgage the payment is higher than a 30 and with a 30yr you end up paying quite a bit more interest. However, my thinking is that I'd like to take out a 30yr mortgage but then willingly increase the mortgage payment amount to that of the 25yr rate which gives me more flexibility down the road because if we ran in to money problems I have the ability to reduce the payment back to the original 30yr base payment. Is there any downsides to using a method like this assuming the increased payment is done for the majority of the mortgage?

Essentially I'm wondering if it's best to go with the lowest possible mortgage payment but be vigilant on increasing the payment to lower the amortization period as I see fit?
That's what I did. Did a 30 year amortization. But set the initial payment as if it was 25. Then increased my payments accordingly afterwards.
Deal Guru
May 1, 2012
10538 posts
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Toronto
30 years and even sometimes 35 years is possible if you put down 20%. Anything with 20% or less, you have to go 25 years.

The difference in interest paid is pretty significant, but it gives you flexibility. The best course of action is to take a 30 year mortgage with flexible pre-payment options. This allows you to hedge against possible financial problems later on. Simply pay as much as you can normally, and then revert to the minimum when finances are scarce.

Another thing of note is the option of paying accelerated bi-weekly. If you do a 30 year mortgage, and you choose the accelerated bi-weekly option, you will pay marginally more interest over the course of the loan than a straight 25 year monthly route. In fact, with accelerated bi-weekly you only pay roughly 27 years worth of mortgage.

Unless you are pretty certain that your will not run into any financial trouble in the next term, you should go with a 30 year bi-weekly accelerated with good pre-payment options. This gives you a lot of freedom. I do not suggest you try the 35 year option though. The flexibility vs penalty simply is not worth it.
Deal Fanatic
Nov 24, 2013
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jfall wrote: how is that stretching? I can easily afford a 25yr mortgage but with a 30yr I get the "option" of lower payments if I was in a bind
The option wouldn't be that much lower though. At 3.49% interest for either option (picking an arbitrary, but reasonable, number) your minimum payments on a 30 year would be $447.09 per $100k balance, and $498.74 per $100k on a 25 year. If you were in Toronto with a $600k mortgage, yes you could cut your monthly payment back by $310 more in a financial emergency. If your mortgage isn't that large though, the difference is less material.
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Jul 16, 2003
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OP is correct. As long as you have 20% down, 30y amortization is easily available. High ratio mortgages (less than 20% down) are limited to 25y. As others already mentioned, a few lenders still offer 35y for conventional mortgages. The concept of applying for a 30y amort e increasing the payment to effectively making it a 25y is great, and a lot of people do that. In some cases, (for example if there is a cash component in the household income that cannot be used for qualification purposes) it is also what allows some clients to qualify for the mortgage amount they want and feel comfortable with.
OP - just make sure your lender allow you to increase the payment by as much as you need, in order to reduce the amortization to a 25y equivalent. Some no frills mortgages have limited pre-payment options and may not have adequate room for that.
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Deal Addict
Oct 11, 2010
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Charlottetown
Great, thanks for the advice. I just wanted to be sure my thinking was correct. It seems as long as you are smart about it, have a lender that will allow the increases you need and increase the mortgage accordingly than it seems to me that a 30yr mortgage can offer me more flexibility than a 25
Deal Fanatic
Oct 1, 2004
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GTA
Just awhile ago when the news reported max mortgage length went from 30 to 25 yrs and heloc ratio went from 80 to 65% of house value, it actually only effect the ppl that can't make the 20% downpaent?

Are 30-35 yr mortgage still easily obtained from big banks compared to when the new rules came into effect?
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Aug 17, 2008
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I have a 35 yr mortgage.

It's better to go with the longest amort that's available to you. It gives you flexibility in case you need to lower your payments for a few months.
Deal Addict
Jun 8, 2004
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Oakville
I had a 25 yr mortgage, and made accelerated bi-weekly payments to make it effectively a 17 yr mortgage, but I could fall back to a 25 yr schedule if money situation became tight...

Why are people stretching themselves even more now, and need to use 30-35 yrs as a "just in case". It used to be a 25 yrs "just-in-case" discussion a decade ago. Times have changed...and the bubble-creating thinking continues.
Deal Addict
Feb 2, 2011
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cba123 wrote: I had a 25 yr mortgage, and made accelerated bi-weekly payments to make it effectively a 17 yr mortgage, but I could fall back to a 25 yr schedule if money situation became tight...

Why are people stretching themselves even more now, and need to use 30-35 yrs as a "just in case". It used to be a 25 yrs "just-in-case" discussion a decade ago. Times have changed...and the bubble-creating thinking continues.
In my case was, why not? There was no reason not to.
Sr. Member
May 5, 2006
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I did this with my mortgage. Did 25 years and doubled up payments. This gives you even MORE flexibility because if I really needed to, I could skip a payment for any payment I'd doubled. As it turned out, I didn't... but it was comforting having that flexibility (only for the term of the mortgage, of course).
Deal Guru
May 1, 2012
10538 posts
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Toronto
cba123 wrote: I had a 25 yr mortgage, and made accelerated bi-weekly payments to make it effectively a 17 yr mortgage, but I could fall back to a 25 yr schedule if money situation became tight...

Why are people stretching themselves even more now, and need to use 30-35 yrs as a "just in case". It used to be a 25 yrs "just-in-case" discussion a decade ago. Times have changed...and the bubble-creating thinking continues.
sounds like someone needs to some zanax in the morning. Just because someone is doing 30 years, doesn't mean it's going to be 30 years. How many people really carry a 30 year mortgage for the entirety? This isn't a 50 year mortgage, it's just 5 years more than what you did... for some more flexibility. Maybe you bought a broken down shack in Orangeville, hence it enabled you to do what you did. Others may have actually purchased a real house.

Please don't have any delusions of grandeur. Flexibility does not necessarily equate "... bubble creating thinking."
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Nov 12, 2003
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i did 30 year mortgage.. and paid it off in 5

saved quite a bit in interest.
Deal Addict
Jun 8, 2004
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Oakville
Anikiri wrote: sounds like someone needs to some zanax in the morning. Just because someone is doing 30 years, doesn't mean it's going to be 30 years. How many people really carry a 30 year mortgage for the entirety? This isn't a 50 year mortgage, it's just 5 years more than what you did... for some more flexibility. Maybe you bought a broken down shack in Orangeville, hence it enabled you to do what you did. Others may have actually purchased a real house.

Please don't have any delusions of grandeur. Flexibility does not necessarily equate "... bubble creating thinking."
You are right, they should get the 30-35 yr mortgage and accelerate payments to 17 yrs then, not just accelerate to 25 yrs; otherwise, they are just stretching themselves thin to afford a more expensive property (ie. getting bigger mortgage principal, whic bids up housing prices more).

Oh, and you got most of the letters of where I bought correct...OxxVILLE...

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