Max Amortization

posted 3 years ago in Home
  • poll: The maximum amortization should be
    50 years : (0 votes)
    45 years : (0 votes)
    40 years : (2 votes)
    6 %
    35 years : (1 votes)
    3 %
    30 years : (12 votes)
    39 %
    25 years : (5 votes)
    16 %
    20 years : (3 votes)
    10 %
    15 years : (2 votes)
    6 %
    10 years : (0 votes)
  • Post # 5
    6073 posts
    Bee Keeper
    • Wedding: August 2012

    @AB Bride:  I never really thought about it, but not going past 30 seems to make sense.  You don’t want a lot of retirement people on limited incomes struggling to pay mortgages until they die.  That was my first tought. 

    Post # 7
    1395 posts
    Bumble bee
    • Wedding: November 2011

    Well, I suppose it may act as a safety net to prevent people from biting off more than they can chew financially (which is one of the culprits behind the recession). Having said that, a 30 year period has made it feasible for DH and I to get on the ladder in a really difficult market for first time buyers. Jury’s still out here.

    Post # 8
    9859 posts
    Buzzing Beekeeper
    • Wedding: May 2014

    @AB Bride:  used to work for a bank, so my opinions may be biased.

    I think, that if you want to extend your ammortization beyond 30 years then a higher downpayment or higher insurance should be required (and it was) CMHC briefly, for about 18 months in 2007/2008, offered 40 year ammoortizations, they quickly realized that this was creating problems and mortgages that people couldn’t handle (this was also around the time that interest rates went crazy – some people got REALLY lucky, but I digress).

    I think 30 years is probably appropriate for most people 35 years maybe, 40 is pushing it.

    I think there needs to be limits when you’re refinancing, you can’t go beyond XX number of years if you’re going over 80% of the value of your home etc.  So many markets have falsely inflated home values right now (Toronto, Vancouver specifically, I’m sure there are many more) who knows what homes will be worth in 15 years, everyone assumes they’ll go up, but you never know!

    Post # 9
    5769 posts
    Bee Keeper
    • Wedding: October 2014

    25-30 years is reasonable. Otherwise, people risk over-buying (and god knows lenders are happy to let them) and when they’re bearing retirement they’ll be still paying the mortgage. You should not be carrying a mortgage when you retire. You’re on a fixed income at that point and should own your home free and clear, not be worrying about potential foreclosure.

    Post # 11
    1925 posts
    Buzzing bee
    • Wedding: May 2013

    I’m fine with a longer amortization period, but most smart banks won’t make a loan longer than 30 years.  (You can have a longer amort period but have the loan due earlier – you’ll just have a balloon payment at the end).  If the house owner doesn’t keep up with maintenance, the house will be worth a lot less in 50 years, so it’s not in the banks best interest to have a loan that long.

    Post # 13
    1690 posts
    Bumble bee
    • Wedding: June 2013

    I personally couldn’t stomach a mortgage for longer then 25 years. I think 30 should be the max, otherwise I don’t feel that couple can afford that home, realistically.

    I bought my first house at the age of 20, and with fast-track payments, I was set to have it paid off at age 38. That would have been sweet! Instead, i sold that house and took the equity and out it into this new house, so now this house will be paid off by the time I’m 50. I think that’s reasonable. 

    Where I’m from, I’m pretty sure you can’t get anything longer then a 25 year mortgage anymore.

    Post # 14
    1925 posts
    Buzzing bee
    • Wedding: May 2013

    Yikes, I’ll try.  They are most commonly referred to as Balloon loans, and they aren’t very common.

    With most mortgages, borrowers get loans that will be fully repaid over a set amount of time. This length of time is referred to as the loan term. In most loans, the amortization period is the same as the loan term, so the loan is paid off in full over that time period.  In a balloon loan, the loan term is not the same as the amotization period.  The monthly payments the borrower makes are not sufficient to repay the loan. As such, the borrower ends up owing a lump-sum payment, consisting of the remaining principle, at the end of the loan term.

    Balloon loans are risky because there’s no guarantee that your house is worth more than the remaining balance on your loan when its due.  

    For more info –

    Post # 16
    2311 posts
    Buzzing bee
    • Wedding: July 2011

    I am in the ’25 yr’ group. I would like to have a longer amortization period but I rather not. Feels like it is just dragging onnnnnnnnnnn… I think the housing here in GTA needs to be more affordable. It is FAR TOO EXPENSIVE for anyone to have a reasonable amortization period here. Both spouses working all their lives, paying off their mortgage. And I don’t even mean something extravagant. The incomes here are low but the housing prices are TOO high. That sucks!

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