BMO Bank of Montreal Strongly Supports Changes to Canada’s Mortgage Market
Encourages Canadians to lower their total cost of borrowing by paying down short term debt and choosing a mortgage with a maximum amortization of 25 years.
TORONTO - BMO Bank of Montreal today endorsed changes to Canada’s mortgage market.
“The actions announced today by Minister Flaherty are prudent, measured, responsible and timely,” said Frank Techar, President, Personal and Commercial Banking, BMO Bank of Montreal. "For many months, BMO has been encouraging Canadians to lower their total cost of household debt by paying down short-term higher interest debt and considering the benefits of a mortgage with a 25-year maximum amortization to help them save interest costs and pay down their mortgage faster.”
“The changes announced by the Minister should sit well with most Canadians. A BMO survey showed that 69 per cent of Canadians are open to the idea of a shorter amortization,” added Mr. Techar. “To make it easier for Canadians to be mortgage-free faster, BMO offers an industry-leading five-year fixed low rate mortgage with a maximum 25-year amortization at 3.69 per cent.”
As part of BMO Bank of Montreal’s ongoing commitment to enhancing the financial literacy of Canadians, Mr. Techar offered the following tips:
Consider a shorter amortization:
* The shorter the life of the mortgage, the less you pay in interest.
* Become mortgage free faster and begin saving more for retirement.
Make sure you can afford what you signed up for:
* Stress-test your budget using a mortgage payment based on a higher 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.
* With a down payment of at 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).
Think carefully about fixed vs. variable:
* While variable rate 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.
Pay down short term debt before taking on a major financial commitment such as buying your first home or upgrading to a larger home.
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