BMO encourages 25-year amortization period with low rate incentive

In a news release yesterday, BMO states that nearly seventy percent of Canadians are “open to the idea of shorter amortizations.” The big bank is encouraging borrowers to consider the shorter, more traditional amortization period by offering low mortgage rate of just 3.54% on their five-year fixed, currently their lowest fixed rate option.

The BMO release offered the following tips for becoming mortgage free faster.

Consider a shorter amortization

  • The shorter the life of the mortgage, the less you pay in interest.
  • A shorter amortization means that you can become mortgage free faster and begin saving more for retirement.

Make sure you can afford what you signed up for

  • Stress-test your financial budget using a mortgage payment based on a higher interest rate.
  • Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

Make a larger down payment

  • If you can provide a bigger down payment, it’s a significant way of helping you pay less interest over the life of your mortgage.
  • If you make a down payment of least 20 per cent, you avoid paying mortgage default insurance.

Make pre-payments when you can

  • Pay weekly or bi-weekly instead of monthly.
  • Increase your mortgage payment (principal and interest).
 This option can be exercised once each calendar year, at any time, without charge.

Think carefully about fixed vs. variable

While variable rates mortgages have been a winning strategy over the long term, fixed rate mortgages (currently at historic lows) come with the peace of mind of being insulated against rate increases and knowing how much of your mortgage you will have paid down at the end of your term.

I’m always happy to answer your Saskatoon real estate questions.  All of my contact info is here. Please feel free to call or email.

Our Saskatoon home search tool offers MLS® listings represented by all real estate brands, presented with more detail than you’ll find anywhere else. Check it out here.

Norm Fisher
Royal LePage Saskatoon Real Estate

Comments

  1. Thank you for posting these great tips! I find that using a mortgage calculator comes in VERY handy as well for making sure all your financing is in check with what type of mortgage you can afford.

  2. Latoya Bridges says:

    [...] This post was mentioned on Twitter by Bo Kauffmann, Mysteriously Unnamed. Mysteriously Unnamed said: RT @norm_fisher TeamFisher.com BMO encourages 25-year amortization period with low rate incentive http://is.gd/isRqy [...]

  3. lawtalkingguy says:

    Great new, imo.

    My wife and I have a 40-year mortgage that we pay as if it’s a 12-year, and we’d definitely be interested in mortgage loans that offer incentives for lower amortizations. Hopefully others feel the same way and these rate incentives stick around…

    • lawtalkingguy,

      Good for you. No doubt, you will be able to look back on this period of time as one of great opportunity. Money for nothing is kind of nice. Best wishes for complete fulfillment of the pay down goal.

  4. Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

    They mean one-third gross (pre-tax) household income correct?

Trackbacks

  1. [...] BMO encourages 25-year amortization period with low rate incentive (teamfisher.com) [...]

  2. [...] This post was mentioned on Twitter by Bo Kauffmann, Mysteriously Unnamed. Mysteriously Unnamed said: RT @norm_fisher TeamFisher.com BMO encourages 25-year amortization period with low rate incentive http://is.gd/isRqy [...]