BMO asks Canadian Home Owners - How Low Can You Go?

BMO brings clarity to home financing decisions and advises Canadians to shorten their mortgage amortization to save thousands of dollars

TORONTO , Feb. 12 /CNW/ - It's time more Canadian homeowners and prospective buyers consider taking a shorter amortization for their mortgage, according to BMO Bank of Montreal .

"While many people choose the longest length of time to pay back their mortgage, they could pay thousands of dollars more in interest in the long run," said Jane Yuen , Senior Manager of Mortgages, BMO Bank of Montreal . "Cutting your amortization period by 5 years from 30 to 25 years could save you over $53,000 in interest. You will be mortgage-free faster and your monthly payments will only increase by $84 ."(1)

Comparison ( $200,000 mortgage at 7 per cent interest on a fixed term(2)):

    
    -------------------------------------------------------------------------
    Amortization             Monthly      Total Interest            Interest
    Period(3)               Payments          you'll pay               Saved
    -------------------------------------------------------------------------
    35 years               $1,263.73         $330,673.02                   -
    30 years               $1,317.21         $274,130.94          $56,542.08
    25 years               $1,400.83         $220,207.26         $110,465.76
    -------------------------------------------------------------------------
    

"Shortening your amortization period during an expected rising interest rate environment makes good sense," according to Sal Guatieri, Senior Economist, Bank of Montreal . "To ensure you aren't negatively affected when rates go up, it is important to work with a mortgage specialist to stress test your financial budget using a mortgage payment based on a higher interest rate," added Yuen.

    
    (1) Example is based on $200,000 mortgage, at 7% APR amortized for 25
        years.
    (2) Per annum, calculated half-yearly, not in advance. The rate shown is
        an example only and is not necessarily applicable to an actual
        mortgage.
    (3) Assumes same interest for entire amortization period.
    

For further information: For news media inquiries or to arrange for an interview please contact: Martha McInnis, Toronto, [email protected], [phone]