Cutting the 30 Year Amortization Might Make Sense

Watch the video on Youtube

#socialFAQ Answer

Yesterday I recorded a video about the news that the government insurer is considering cutting 30 year amortizations on conventional ratio mortgages. My thoughts on the subject were that I think it would be better to change qualification at 30 years to 25 years, but allow for payments to still be made at the 30 year schedule to allow for better financial planning.

I shared this video to my Facebook account and got asked the question:

Jackson, just curious, roughly what percentage of your clients are taking a 30-year conventional mortgage?

I asked Darren Quilley and Jennifer Huynh for their take and we have come up with the following for our clients at First Foundation:

Over 50% of conventional purchases are taking 30 year amortizations while more like 80% of mortgage refinances are going the distance.

After connecting a few more dots, it seems that the government regulator isn't out in left field with this attention to extended amortizations as... according to the annual state of the residential mortgage market in Canada prepared by CAAMP:

So if roughly 80% of the mortgage refinances through our office are taking extended amortizations, and 83% of Canadians mortgages are considered low ratio... limiting extended amortizations is very line with the recent changes the government has been making. Especially the changes to the mortgage cap in August of 2013.

I am not saying that I like it... just saying that this move makes sense if the government is to continue making changes.

References

In the video, I referenced the following posts.

• 30 Year Amortizations Make for Better Financial Planning
• Annual State of the Residential Mortgage Market in Canada
• Why Did CMHC Cap Mortgage Guarantees?
  

Here is a list of other videos you might like in our Social FAQ Series. Enjoy!