Longer Amortizations Attract New Homebuyers
A friend of mine has a theory about why it’s so difficult for Generations X and Y to put together enough money for a traditional down payment on a house. He thinks that the fact that our Boomer parents are living longer is having an impact on when our generation will receive our “inheritance”. (I put that word in quotes because I’m fairly certain that there won’t be any money left by the time my parents shuffle off this mortal coil.)
Personally, I think that the fact that most of my contemporaries left post-secondary education with debt levels equivalent to a sizeable mortgage down payment doesn’t help the situation.
Or perhaps it’s the fact that our parents had pensions and weren’t consumed with worry over their retirement and how much money to put into their RRSPs.
So it doesn’t surprise me that according to the Canadian Association of Accredited Mortgage Professionals (CAAMP), almost half of new homeowners opt for a 30 year amortization. For most, it’s a cash flow issue: a longer amortization period means lower monthly payments. It also means paying considerably more in interest over the life of the mortgage. For many new homebuyers, the price of admission into the real estate market is high, but still considered worth it.