Canadians have an average of 15 years left on their mortgages, according to a recent survey conducted by BMO Bank of Montreal. The results are encouraging and show that home owners are striving to be debt-free in a shorter and more reasonable amount of time. With the new mortgage rules enforced on July 9th, the average time it takes to pay off a mortgage will likely continue to decrease as the maximum amortization is lowered from 30 to 25 years.
The survey also revealed that Canadians are on the right track when it comes to eliminating their mortgage debt sooner as 20 per cent have five years or less remaining on their mortgage compared to 12 per cent who still have 25 years remaining.
According to BMO Economists, the new mortgage rules should help create a soft landing for Canada’s housing market. Under the new rules, the refinancing limit decreased to 80 per cent of home equity, which may encourage home owners to pay down their mortgage faster and later increase their refinancing options. This, in addition to a shorter maximum amortization period for insured-mortgages, will help home owners be debt-free sooner, while paying less interest overall. With current mortgage rates at historic lows, BMO mortgage rates are no exception. Their rates are flexible and will allow consumers to make large down payments, or additional payments without penalty. A mortgage payment calculator will help to assess the amount of years left on your mortgage so you can plan ahead and take the necessary steps to pay off your mortgage in record time.
Provincially, the amount of years left on mortgages differs in each province. For instance, one in four home owners in Manitoba and Saskatoon have five years or less left on their mortgage. This means Canadians in the Prairies will be debt-free faster than anywhere else in the country! On the other end of the spectrum, one in five British Columbians have 26 years or more of mortgage debt left to pay. In Ontario, only seven per cent of the population has more than 25 years of mortgage debt.
The senior Economist at BMO Capital Markets, Sal Guatieri, says the new mortgage rules will help ease the burden of household debt in Canada and have a significant impact in moderating the country’s real estate market. Furthermore, the new rules are expected to curb demand and dampen house prices. Guatieri estimates average home prices would need to drop 3 per cent in order to neutralize the impact on mortgage payments as a result of the amortization rule change. He says, “By helping to cool the market now, the rule changes should increase the odds of a soft – rather than hard – landing.”
The BMO survey was conducted between March 19th – March 22, 2012 and sampled 1000 Canadian home owners.