A 30-year mortgage is attractive to a lot of Canadians because it often dramatically lowers a homeowner’s monthly payments than a shorter mortgage. That said, you pay more in interest the longer your mortgage is and thereby end up sinking more money than you may want into reimbursing your lender. Even so, while 25-year mortgages are the most common in Canada, there are appealing reasons to seek out a 30-year mortgage. Here are the pros and cons of locking in a 30-year mortgage in Canada.

Who Can Apply

To apply for a 30-year mortgage, you are required to either be one of the following:

  • A first-time home-buyer.
  • Anyone purchasing a new construction.
  • A buyer with a 20% down-payment or higher.

If you fall into the category of someone requiring a 20% down-payment, a 30-year mortgage will prove excessively difficult to obtain. Compare this to a 25-year mortgage where the minimum down-payment for many lenders is as low as 5%.

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Pro – Lower Monthly Payments

The longer your mortgage term is, the less you pay monthly on it. Decreased monthly payments mean increased affordability and a lower total debt service ratio. This may help some lenders finance larger home purchases than what you would be eligible for on a shorter term.

Con – Likely To Pay More Interest

Thirty years of interest is more interest than a shorter term. The interest rate will likely be higher compared to a mortgage with an amortization of 25 years or less as well. You will likely pay tens of thousands more in interest over the course of a 30-year mortgage compared to a 25-year.

Pro – More Flexibility To Make Prepayments

Under a 30-year term, you may have more freedom to make prepayments. If so, you may utilize this strategy to shorten the life of your loan. This is not too different from the flexibility of an open mortgage compared to a closed mortgage.

Con – You Carry Mortgage Debt For Longer

When you are near retirement age and still paying off your mortgage, this isn’t a situation to aspire for. This means more debt and less flexibility to contribute to other accounts, such as an RRSP or TFSA designated for retirement savings.

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Pro – Port A 30-Year Mortgage To A New Property

Many lenders will allow you to port a 30-year mortgage to a new property worth more than $1 million. This may help facilitate a new home purchase even if you are in the middle of a mortgage term, eliminating the worry of what happens if you break your mortgage contract.

30-Year Mortgages May Offer You The Best Terms

To purchase your dream home, your best offer and recommendation may be to take a 30-year mortgage as it allows you to qualify for more financing and leaves more breathing room in your budget. The thing to remember about a 30-year mortgage is that it’s neither good nor bad. It’s simply one possible amortization option. Even if you’re aware of its disadvantages, there are a lot of positives in a 30-year mortgage that many homebuyers can benefit from.

Are you looking to buy a home in Etobicoke or Toronto? Talk to the real estate team of Adrian + Andrea today to browse properties and discuss what type of property you’re looking for. Reach us by email at info@adrianandrea.com or call (416) 319-6893.