Canadians open to shorter mortgage term: Poll

More than half of Canadians would consider a shorter term for their mortgages to save on interest costs in the long run, according to a BMO survey.

Those aged 35 to 44 were the most open to shorter amortizations, with 77% saying it was something they would consider. The survey also found 70% of families with children would consider shorter amortizations, compared with 48% of those without children.

To curb excessive borrowing, the government is cutting the maximum length of time a mortgage can be taken out with government insurance from 35 years to 30 years. Longer time spans means initial mortgage payments are lower but the homeowner ends up paying much more over the life of the loan.

“For example, on a $250,000 mortgage at a 6% interest rate, moving from a 30 year to a 25 year amortization can save upwards of $55,000 in interest, which can be put directly towards your retirement,” said Katie Archdekin, head of mortgage products with BMO Bank of Montreal.

The BMO poll also found 62% of men were more likely to consider shorter amortizations, compared with 50% of women.

BMO Economics expects the Bank of Canada to begin raising its interest rates in summer, moving from 1% to 2% by year-end.