Great News On The Canadian Inflation Front

General Kimberly Coutts 17 Apr

Great News On The Inflation Front
 

The Consumer Price Index (CPI) rose 2.9% year-over-year in March, as expected, up a tick from the February pace owing to a rise in gasoline prices, as prices at the pump rose faster in March compared with February. Excluding gasoline, the all-items CPI slowed to a 2.8% year-over-year increase, down from a 2.9% gain in February.

Shelter prices increased 6.5% year over year in March, rising at the same rate as in February.
The mortgage interest cost index rose 25.4% y/y in March, following a 26.3% increase in February. The homeowners’ replacement cost index, which is related to the price of new homes, declined less in March (-1.0%) compared with February (-1.4%) on a year-over-year basis.

Rent prices continued to climb in March, rising 8.5% year over year, following an 8.2% increase in February. Among other factors, a higher interest rate environment, which can create barriers to homeownership, puts upward pressure on the index.

Prices for services (+4.5%) continued to rise in March compared with February (+4.2%), driven by air transportation and rent. This outpaced price growth for goods (+1.1%), which slowed compared with February (+1.2%) on a yearly basis.

On a seasonally adjusted monthly basis, the CPI rose 0.3% in March.
 

The Bank of Canada’s preferred core inflation measures, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trim slowed a tick to 3.1% y/y in March, and the median declined two ticks to 2.8% from year-ago levels, as shown in the chart below.
 

Bottom Line

Most importantly, the three-moving average of all core measures of Canadian inflation fell to below 2%, the Bank of Canada’s target inflation level. Governor Tiff Macklem got exactly what he was hoping for: Further confirmation that core inflation was falling within the target range.

Shelter remains the single most significant contributor to total inflation. Excluding shelter, inflation is tracking just 1.5% and has been below the central bank’s 2% target for most of the past six months. This has slowed economic activity, reducing consumer discretionary spending and making it more difficult for businesses to raise prices. Once interest rates fall, mortgage interest costs—a large component of shelter costs—will start falling.

The three-month annualized rates of the Bank of Canada’s core-median and trim indicators slowed to just 1.3% (see chart below), and the average year-over-year rates are down a tick to 3.0%. According to the economists at Desjardins, “the share of components in the CPI basket that are rising more than 3%, an indicator closely watched by Governor Macklem, is down to 38% from 41%. And the share of components showing price growth of less than 1% is up to 44% from 38% in February. Both suggest that the breadth of inflationary pressures is becoming more consistent with the Bank of Canada’s 2% target”.

We will see the April inflation data on May 21, before the next BoC decision date. While gasoline prices have continued to rise this month, so far, the gain has been more muted than in March. With any luck, today’s data will set the stage for the first BoC rate cut in June.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Bank of Canada Hold Rates Steady for Sixth Consecutive Meeting

General Kimberly Coutts 10 Apr

As you likely have already heard today, the Bank of Canada announced it’s keeping its benchmark interest rate at 5.0%, unchanged from July of 2023.  This means that there is NO change for those within variable rate mortgages, lines of credit or any other loans tied to the Bank of Canada Rate which continues to sit at 7.2%.

Governor Macklem’s prepared opening statement at today’s press conference was more dovish on inflation than in prior months.  “We are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained.”  If things going according to today’s Monetary Policy Report forecasts, policymakers are likely to begin cutting the overnight rate in June.  Once again these Bank of Canada Interest updates affect VARIABLE rate mortgages etc.

Over the last couple of weeks, we have seen a decrease in 3 & 5 year fixed rates due to the Bonds trending downwards, however US inflation unfortunately blew past expectations and caused a spike in the US 10 year Treasury Yield.  Thus causing a spike in the Canadian Government of Canada Bond yield to jump up….Fixed Rates may go up once again so if you’re at all contemplating home ownership or a renewal I URGE you to get in touch asap so that we can complete a full financial analysis and get rate holds completed.  Rate holds are good for 120 days and insured rates (mortgage rates for those that have less than 20% down payment) are sitting at 4.99% as of today.

I’m grateful to my lender partners at First National who provided a summary of the Bank’s key observations below.

Canadian Inflation

  • CPI inflation slowed to 2.8% in February, with easing in price pressures becoming more broad-based across goods and services. However, shelter price inflation is still very elevated, driven by growth in rent and mortgage interest costs
  • Core measures of inflation, which had been running around 3.5%, slowed to just over 3% in February, and 3-month annualized rates are suggesting downward momentum
  • The Bank expects CPI inflation to be close to 3% during the first half of 2024, move below 2.5% in the second half, and reach the 2% inflation target in 2025

Canadian Economic Performance and Housing

  • Economic growth stalled in the second half of last year and the economy moved into excess supply
  • A broad range of indicators suggest that labour market conditions continue to ease. Employment has been growing more slowly than the working-age population and the unemployment rate has risen gradually, reaching 6.1% in March. There are some recent signs that wage pressures are moderating
  • Economic growth is forecast to pick up in 2024. This largely reflects both strong population growth and a recovery in spending by households
  • Residential investment is strengthening, responding to continued robust demand for housing
  • The contribution to growth from spending by governments has also increased. Business investment is projected to recover gradually after considerable weakness in the second half of last year. The Bank expects exports to continue to grow solidly through 2024
  • Overall, the Bank forecasts GDP growth of 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026. The strengthening economy will gradually absorb excess supply through 2025 and into 2026

Global Economic Performance and Bond Yields

  • The Bank expects the global economy to continue growing at a rate of about 3%, with inflation in most advanced economies easing gradually
  • The US economy has “again proven stronger than anticipated, buoyed by resilient consumption and robust business and government spending.” US GDP growth is expected to slow in the second half of this year, but remain stronger than forecast in January
  • The euro area is projected to gradually recover from current weak growth. Global oil prices have moved up, averaging about $5 higher than the Bank assumed in its January Monetary Policy Report
  • Since January, bond yields have increased but, with narrower corporate credit spreads and sharply higher equity markets, overall financial conditions have eased
  • The Bank has revised up its forecast for global GDP growth to 2.75% in 2024 and about 3% in 2025 and 2026
  • Inflation continues to slow across most advanced economies, although progress will likely be bumpy. Inflation rates are projected to reach central bank targets in 2025

Outlook

Based on the outlook, the Governing Council said it decided to hold the Bank’s policy rate at 5% and to continue to “normalize” the Bank’s balance sheet. It also noted that while inflation is still too high and risks remain, CPI and core inflation have eased further in recent months.

The Council said it will be looking for evidence that this downward momentum is sustained. The Governing Council is particularly watching the “evolution of core inflation,” and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.

As it has said consistently over the past year, the Bank will remain “resolute in its commitment to restoring price stability for Canadians.”

Next Touchpoint

Stay tuned as the Bank returns on June 5th with another monetary policy announcement and economists are already lining up with predictions of a rate cut either then or in July.  Fingers crossed.

If you’re contemplating getting into the market or wanting how to proceed with your renewal, get in touch to set up a Discovery Call.  www.ChatWithTheMortgageMaven.com  I’m always here to assist and happy to chat.

Great News On The Canadian Inflation Front

General Kimberly Coutts 19 Mar

Great News On The Inflation Front
 

The Consumer Price Index (CPI) rose 2.8% year-over-year in February, down from the 2.9% January pace and much slower than the 3.1% expected rate. Gasoline prices rose in Canada for the first time in five months, which led many analysts to forecast a rise in February inflation as seen in the US. However, offsetting the increase in gas prices was a deceleration in the cost of cellular services, food purchased from stores, and Internet access services.

Excluding gasoline, the headline CPI slowed to a 2.9% year-over-year increase in February, down from 3.2% in January. Prices for rent and the mortgage interest cost index continued to apply upward pressure on the headline CPI.

On a monthly basis, the CPI rose 0.3% in February, the same as in January. The most significant contributors to the monthly increase were higher travel tours and gasoline prices.

On a seasonally adjusted monthly basis, the CPI rose 0.1% in February.

Prices for food purchased from stores continued to ease year over year in February (+2.4%) compared with January (+3.4%). Slower price growth was broad-based, with prices for fresh fruit (-2.6%), processed meat (-0.6%), and fish (-1.3%) declining. Other food preparations (+1.4%), preserved fruit and fruit preparations (+4.0%), cereal products (+1.7%), and dairy products (+0.6%) decelerated in February.
 

February was the first month since October 2021 that grocery prices increased slower than headline inflation. The slower price growth is partially attributable to a base-year effect, as food purchased from stores rose 0.7% month over month in February 2023 due to supply constraints amid unfavourable weather in growing regions and higher input costs.

While grocery price growth has been slowing, prices continue to increase and remain elevated. From February 2021 to February 2024, prices for food purchased from stores increased by 21.6%.
 

The Bank of Canada’s preferred core inflation measures, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trim slowed two ticks to 3.2% in February, and the median also declined two ticks to 3.1% from year-ago levels, as shown in the chart below.
 

Bottom Line

The next meeting of the Bank of Canada Governing Council is on April 10. Before then, we will see two more important data releases:

  1. The Bank of Canada Business Outlook Survey and Canadian Survey of Consumer Expectation and;
  2. The Labour Force Survey for March.

Neither of these reports will likely derail the central bank’s move to cut interest rates by the June 10 meeting. Indeed, they could begin to cut rates at the April meeting. This would no doubt trigger a whopping Spring housing market, which is likely to be strong. There is significant pent-up demand for housing, and the prospect of home price increases could well move buyers off the sidelines if a surge in new listings comes to fruition.

The Canadian economy is particularly interest rate sensitive because of the vast volumes of mortgages that will be renewed in the next two years. Mortgage delinquency rates are already rising, so a gradual decline in interest rates is welcome news.

As the chart below shows, the three-month rolling average growth rates for the CPI trim and median core measures averaged 2.2% in February–their lowest reading in three years.

According to the Royal Bank economists, “Building on the January CPI report that was already showing broad-based easing in price pressures in Canada, the February report today reaffirmed those trends. Different measures of core inflation decelerated, and the diffusion index that measures the scope of inflation pressures also improved. That measure, however, was still showing slightly broader price pressures than pre-pandemic “norms”, suggesting there’s still room for more improvement.”

With the economy’s slow growth trajectory, the central bank has every reason to begin cutting interest rates soon.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Canadian Home Sales Stop Falling In February As Prices Hold Steady

General Kimberly Coutts 19 Mar

February data bode well for a strong spring housing market
 

The Canadian Real Estate Association announced today that national home sales dipped 3.1% m/m in February while home prices were flat, ending a five-month price decline that began last fall.

It was noteworthy that prices remained unchanged from January to February, given that they dropped 1.3 from December to January. The MLS Home Price Index tends to be relatively stable, so a shift in pricing behaviour this large is quite unusual. It has happened only three other times in the past two decades. All three times were in the past four years when demand was poised to rise sharply: May 2020, right after the initial COVID slump; January 2022, before interest rates were increased; and April 2023, when people thought the Bank of Canada would continue to pause. The rebound in home sales in 2023 led the central bank to hike interest rates two more times.

There is significant pent-up demand for housing owing to strong population growth and first-time homebuyers’ fears that prices will rise sharply once the Bank of Canada cuts interest rates.
 

New Listings

The number of newly listed homes edged up 1.6% m/m in February. Depending on how many owners prepare to list their properties for sale this spring, gains may rise in the months ahead.

“After two years of mostly quiet resale housing activity, there’s a feeling that things are about to pick up,” said Larry Cerqua, Chair of CREA. “At this point, it’s hard to know whether buyers are going to wait for a signal from the Bank of Canada or whether they’re just waiting for the spring listings to hit the market.

With sales edging down and new listings inching up in February, the national sales-to-new listings ratio eased a bit to 55.6%. The long-term average is 55%. A sales-to-new listings ratio between 45% and 65% is generally consistent with balanced housing market conditions, with readings above and below this range indicating sellers’ and buyers’ markets, respectively.

At the end of February 2024, there were 3.8 months of inventory nationwide, up slightly from 3.7 months at the end of January. The long-term average is about five months of inventory.
 

Bottom Line

With pent-up demand for housing rising with every rent increase, the spring housing season is likely to be robust, even before the central bank cuts interest rates. We believe the BoC will begin reducing the policy rate in June. Tomorrow, we will get the CPI data for February. The US CPI data for February, released last week, were disappointing as gasoline prices increased headline inflation and core measures remained well above 3%.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Economic Insights from Dr. Sherry Cooper

General Kimberly Coutts 15 Mar

 

The focus of the Bank of Canada is on slaying the inflation dragon. The good news is that the year has started with a marked decline in price pressures. Due to falling energy prices, airline fares and a deceleration in clothing and food, year-over-year inflation in January dipped to 2.9%. This follows 3.4% inflation in December.

The cost of shelter represents nearly a third of the Consumer Price Index, and the combination of rapidly rising population growth and already acute excess demand for housing will continue to underpin higher-than-target inflation. While mortgage interest costs will decline once the central bank begins to cut interest rates, and home replacement costs have already declined because of the overall decline in national home prices, rental costs are surging. In January, rents rose by nearly 8% y/y.

The pace of housing starts in Canada is inadequate to keep up with future demand. Over the past year, the population has increased by a whopping 1.3 million people, while housing starts are running at less than 250,000 annual pace. To be sure, starts saw strong year-over-year growth last year—the second-highest number of starts since 1990. Nonetheless, this is nowhere near sufficient to meet demand. Not to mention to meet affordable demand.

Even with the best intentions of governments at all levels, it is virtually impossible to maintain even this level of starts given zoning restrictions, land development costs, labour shortages and rising construction costs. Actions taken thus far by federal, provincial and municipal governments help, but we cannot house the current pace of immigration without seeing substantial upward pressure on rents.

According to economists at the National Bank, the difference between annual headline CPI inflation and shelter inflation is at its highest level since 1982. The Bank of Canada is mindful of these conditions. Inflation has fallen to the 2% target, excluding shelter costs, but those costs feed into inflation expectations and mounting wage demands.

Next week, Statistics Canada will release the fourth quarter GDP data, which is expected to run at about a 1.0% annual rate. There will be revisions to the -1.1% Q3 number as well. With the help of population growth, Canada has avoided a recession despite the huge increase in interest rates this cycle. But the labour market is slowing, and job vacancies have fallen sharply.

Homeowners will suffer marked increases in their monthly mortgage payments as they renew this year and next. Aware of this, the Bank will likely begin to cut interest rates by mid-year—beginning a series of rate cuts that will continue over the next two years.

Housing activity has likely bottomed, and home price pressures will begin to mount, especially in the GTA and GVA, where price declines were the largest. We believe the central bank will start cutting interest rates by mid-year.
 

Tips to Improve your credit score

General Kimberly Coutts 15 Mar

 

One of the important factors in home ownership is understanding things like your credit score.  Some people don’t pay much attention to this metric until they begin the mortgage discussion!

However, you will find that your credit score is one of the most important factors when it comes to qualifying for a mortgage at the best rate – and with the most purchasing power.

Credit scores range from 300 to 900, the higher your credit score the better. Ideally, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down. If you are able to make a larger down payment of 20% or more, then a score of 680 is not required.

This score is based on spending habits and behaviours including:

  • Previous payment history and track record of paying your credit accounts on time is the number one thing that your credit score considers.
  • Your current level of debt and whether you’re maxed or not is the second most important factor.
  • How long you have had your credit in good standing is the third most important factor.
  • Attaining new credits is the fourth factor and can be a red flag if you’re opening several credit cards, accounts, or loans in a short period.

If you want to improve your credit score, you can! It is a gradual process, but it is well worth it. Here are some tips to help you get started!

  1. Pay Your Bills: This seems pretty straightforward, but it is not that simple. You not only have to pay the bills, but you have to do so in full AND on time whenever possible.  Paying bills on time is one of the key behaviors lenders and creditors look for when deciding to grant you a loan or mortgage. If you are unable to afford the full amount, a good tip is to at least pay the minimum required as shown on your monthly statement to prevent any flags on your account.
  2. Pay Your Debts: Whether you have credit card debt, a car loan, a line of credit, or a mortgage, the goal should be to pay your debt off as quickly as possible. To make the most impact, start by paying the lowest debt items first and then work towards the larger amounts. By removing the low-debt items, you also remove the interest payments on those loans which frees up money that can be put towards paying off larger items.
  3. Stay Within Your Limit: This is key when it comes to managing debt and maintaining a good credit score. Using all or most of your available credit is not advised. Your goal should be to use 70% or less of your available credit. For instance, if you have a limit of $1000 on your credit card, you should never go over $700. NOTE: If you find you need more credit, it is better to increase the limit versus utilizing more than 70% of what is available each month.
  4. Credit and Loan Application Management: Reduce the number of credit card or loan applications you submit. When you submit too many credit card applications, your credit score will go down, and multiple applications in a short period can do more damage. You’re best to apply for one or two cards and wait to see if you are accepted before attempting further applications.

If you have questions about your credit score, don’t hesitate to reach out to me today! Whether you want to check your score or find out how you can improve it, my door is always open.

Your credit mix is the final aspect of your credit score to determine whether you have a healthy mix of credit cards, loans, lines of credit, etc.

 

March is Fraud Awareness Month

General Kimberly Coutts 15 Mar

 

Did you know? March is Fraud Awareness Month.

Protecting yourself and your mortgage from fraud is crucial to safeguard your financial well-being.

Understanding some of the more common mortgage fraud scams and how to protect yourself can make all the difference!

The most common type of mortgage fraud involves a criminal obtaining a property, and then increasing its value through a series of sales and resales involving the fraudster and someone working in cooperation with them. A mortgage is then secured for the property based on the inflated price. Below are some red flags to be aware of as potential lead-ins to fraud:

  • If someone offers you money to use your name and credit information to obtain a mortgage
  • If you are encouraged to include false information on a mortgage application
  • If you are asked to leave signature lines or other important areas of your mortgage application blank
  • If the seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing
  • If the seller or developer rebates money on closing, and you don’t disclose this to your lending institution

Another fraud scheme to be aware of is title fraud. Title fraud is essentially a form of identity theft and is typically discovered when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings.

With title fraud an individual, who is using false identification to pose as you, will register forged documents transferring your property to his/her name. From there, they register a forged discharge of your existing mortgage and get a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.

But don’t panic! There are lots of ways you can protect yourself from title fraud:

  • Always view the property you are purchasing in person
  • Check listings in the community where the property is located – compare features, size, and location to establish if the asking price seems reasonable
  • Make sure your representative is a licensed real estate agent
  • Beware of realtors or mortgage professionals with a financial interest in the transaction
  • Ask for a copy of the land title or go to a registry office and request a historical title search
  • In the offer to purchase, include the option to have the property appraised by a designated or accredited appraiser
  • Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab
  • Ask to see receipts for recent renovations
  • When you make a deposit, ensure your money is protected by being held “in trust”
  • Consider the purchase of title insurance. While title can be purchased after taking possession or years later, the best time to purchase a title insurance policy is NOW before an issue like fraud is discovered.

Remember, being proactive and vigilant is key to protecting yourself and your mortgage from fraud. If you suspect fraudulent activity, act promptly to mitigate potential damage and report it to the appropriate authorities.

BoC Holds Rates Steady Waiting To See Further Declines In Core Inflation

General Kimberly Coutts 11 Mar

The Bank of Canada Holds Rates Steady Until Core Inflation Falls Further
 

Today, the Bank of Canada held the overnight rate at 5% for the fifth consecutive meeting and pledged to continue normalizing the Bank’s balance sheet. Policymakers remain concerned about risks to the outlook for inflation. The latest data show that CPI inflation fell to 2.9% in January, but year-over-year and three-month measures of core inflation were in the 3% to 3.5% range. The Governing Council projects that inflation will remain around 3% over the first half of this year but also suggests that wage pressure may be diminishing. The likelihood is that inflation will slow more rapidly, allowing for a rate cut by mid-year. 

The Bank also noted that Q4 GDP growth came in stronger than expected at 1.0% but was well below potential growth, confirming excess supply in the economy.

Employment continues to rise more slowly than population growth. During the press conference, Governor Macklem said it was too early to consider lowering rates as more time is needed to ensure inflation falls towards the 2% target.
 

Bottom Line

The Bank of Canada expects that progress on inflation will be ‘gradual and uneven.’ “Today’s decision reflects the governing council’s assessment that a policy rate of 5% remains appropriate. It’s still too early to consider lowering the policy interest rate,” Macklem said in the prepared text of his opening statement. The Bank is pushing back on the idea that rate cuts are imminent.

High interest rates are dampening discretionary spending for households renewing mortgages at much higher monthly payments. As the economy slows in the first half of this year, the BoC will signal a shift towards easing. This could happen at the next meeting on April 10, when policymakers update their economic projections. This could prepare markets for a June rate cut.

“We don’t want to keep monetary policy this restrictive longer than we have to,” Macklem said. “But nor do we want to jeopardize the progress we’ve made in bringing down inflation.”
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

No Recession In Canada, As Q4 GDP Growth Rose 1%

General Kimberly Coutts 29 Feb

Still No Recession In Canada Thanks to Huge Influx of Immigrants
 

Real gross domestic product (GDP) rose a moderate 1.0% (seasonally adjusted annual rate), a tad better than expected and the Q3 contraction of -1.2% was revised to -0.5%. This leaves growth for 2023 at a moderate 1.1%. Monthly data, also released today by Statistics Canada, showed that December came in flat, well below the robust flash estimate, while the January preliminary estimate was a strong +0.4% (subject, of course, to revision). The January uptick was driven by the return of Quebec public servants and a mild winter.

The fourth quarter growth was fueled by higher oil exports and was moderated by a significant decline in business investment. Housing investment declined again in Q4–a sixth decline in the last seven quarters. Despite increased activity in Q4 new residential construction and renovations, it was more than offset by a large drop in home ownership transfer costs, reflecting the weakening resale market across Canada. Single-family units and apartments led the rise in new construction, as all provinces and territories, except Prince Edward Island, post a rise in housing starts.

Investment in non-residential structures fell sharply, as did spending on machinery and equipment, especially on aircraft and other transportation equipment. Even government spending declined.
 

Bottom Line

This is the last major economic release before the Bank of Canada meets again on March 6. The central bank will hold interest rates steady at next week’s meeting, and while some are suggesting the first rate cut this cycle will be as soon as the April confab, the consensus remains at June. With the uptick in growth in Q4, there is no urgency for the Bank to ease.

Policymakers will wait for their favourite core inflation measures to fall within the 1%-to-3% target band. They know that GDP per capita is falling and that mortgage renewals at higher interest rates will dampen household discretionary income. That’s why a June rate cut is widely expected.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Amortization Options.

General Kimberly Coutts 29 Feb

Amortization Options.
Your mortgage amortization period is the number of years it will take you to pay off your mortgage. Depending on your choice of amortization period, it will affect how quickly you become mortgage-free as well as how much interest you pay over the lifetime of your mortgage (a longer lifetime equals more interest, whereas a shorter lifetime equals less interest but also bigger payments).

Amortization Benchmarks
Let’s start by looking at the mortgage industry benchmark amortization period. This is typically a 25-year period and is the standard that is used by the majority of lenders when it comes to discussing mortgage products. It is also typically the basis for standard mortgage calculators. While this is the standard, it is not the only option when it comes to your mortgage amortization. Mortgage amortizations can be as short as 5 years and as long as 35 years!

Benefits of a Shorter Amortization
Opting for a shorter amortization period will result in paying less interest overall during the life of your mortgage. Choosing this amortization schedule means you will also become mortgage-free faster and have access to your home equity sooner! However, if you choose to pay off your mortgage over a shorter time frame, you will have higher payments per month. If your income is irregular, you are at the maximum end of your monthly budget or this is your first home, you may not benefit from a shorter amortization and having more cash flow tied up in your monthly mortgage payments.

Benefits of a Longer Amortization
When it comes to choosing a longer amortization period, there are still advantages. The first is that you have smaller monthly mortgage payments, which can make home ownership less daunting for first-time buyers as well as free up additional monthly cash flow for other bills or endeavors. A longer amortization also has its advantages when it comes to buying a home as choosing a longer amortization period can often get you into your dream home sooner, due to utilizing standard mortgage payments versus accelerated. In some cases, with your payments happening over a larger period, you may also qualify for a slightly higher value mortgage than a shorter amortization depending on your situation.

Let’s Chat!
I would be happy to help with the decision for the amortization that best suits your unique requirements and ensures you have adequate cash flow. However, it is important to mention that you are not stuck with the amortization schedule you choose at the time you get your mortgage. You can shorten or lengthen your amortization, as well as consider making extra payments on your mortgage (if you set up pre-payment options), at a later date.

Ideally, you are re-evaluating your mortgage at renewal time (every 3, 5, or 10 years depending on your mortgage product). During renewal is a great time to review your amortization and payment schedules or make changes if they are no longer working for you.

If you have any questions or are looking to get started on purchasing a home, don’t hesitate to book a Discovery Call with me today!

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