In an effort to ensure that Canadians do not come even close to falling to the subprime mortgage woes and despair that the US has been facing, the decision has been made by CMHC to end 40 year amortization periods for home buyers. The 40 year mortgage was only put into place last year as home prices across Canada were on the rise, making it hard for first time home buyers in Saskatoon as well as first time home buyers in Canada to purchase a new home. The theory was to keep monthly payments low, but this also means more risk.
I, personally, at first hated the thought of a 40 year mortgage. Working with so many first time home buyers in Saskatoon though, I began to see the benefits and am still undecided if I agree with CHMC no longer backing it. Just because someone was buying a home in Saskatoon under the 40 year amortization period to get started did not mean that Saskatoon home buyer had to stay with the 40 year mortgage for 40 years. This is a way to get people into the market. In theory, a persons annual salary should increase, not decrease, throughout their life, which should make it easier to increase your monthly payments after your first term, thereby decreasing the amortization to 30 years, 25 years, etc.
Many financial advisors and institutions did not like the 40 year mortgage as they were worried the buyers would not be able to survive a shift in economy, but out of the 40% of 40 year mortgages many of them were entrepreneurs who finally found a way to finance their small businesses.
By killing the 40 year mortgage, CHMC was trying to protect us from overextending and possibly not being able to pay back their loans. One of the biggest users of the 40 year mortgage though was not only the first time home buyer in Saskatoon, but it was also entrepreneurs across Canada. So, not only will it be harder for first time home buyers in Saskatoon after October, it will be harder for small business owners as well.
So, if you are contemplating getting into the Saskatoon housing market and are not able to go the 25-30 year route, you better get into the Saskatoon housing market before October if you want to take advantage of the 40 year mortgage.
For more information on this or if you are looking to buy or sell a home in Saskatoon or the surrounding area be sure to contact me!
Kari Calder
Saskatoon Real Estate Agent
Century 21 Conexus Realty Ltd.