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Equitable Bank unveils 40-year amortization mortgage (ON, BC, AB) (www.canadianmortgagetrends.com)

submitted 1 year ago* (last edited 1 year ago) by [email protected] to c/[email protected]

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[–] [email protected] 12 points 1 year ago* (last edited 1 year ago) (4 children)

Although exact pricing was not yet available, rates are expected in the 9% range given that this is an uninsured alternative lending product with an extended amortization and potential higher risks

Can you feel affordability flowing?

EDIT : Just for fun, I ran the numbers :

• Loan of $500,000 at 7% over 25 years: monthly payment $3,534, total interest $560,169

• Loan of $500,000 at 7% over 30 years: monthly payment $3,327, total interest $697,545

• Loan of $500,000 at 9% over 40 years: monthly payment $3,857, total interest $1,351,268

I don't even understand the existence of this product...

[–] [email protected] 4 points 1 year ago

Madness.

[–] [email protected] 4 points 1 year ago (1 children)

The higher rates more than negate any benefit to monthly payments of extending the amortization. I have no idea why someone would choose this.

[–] [email protected] 3 points 1 year ago

The only reason I can see is that the mortgage isn't funded by Equitable Bank but by a third-party lender. So I wonder if this is a way to circumvent the lending ratios on mortgages, which would allow people to qualify for higher amounts despite the higher interest rate.

[–] [email protected] 3 points 1 year ago* (last edited 1 year ago) (1 children)

Why did you increase the interest rate to 9% for your 40 year calculation?

Edit: oh, in the article it says they expect rates to be in the 9% range.

I agree with the other commenter. With the higher rate and no benefit of the longer amortization period, this is insane. Doesn't do anything to help people trying to afford a mortgage.

[–] [email protected] 1 points 1 year ago

Yes... With current rates below 6% and going as low as 5.4%, the difference is even higher.