Drastically extended amortizations drive total mortgage costs significantly higher: Ratehub.ca

As some homeowners extend their amortization well beyond the typical 25-year period, an analysis from Ratehub.ca found that overall mortgage costs could increase by nearly 180 per cent over a 90-year timeframe.

A series of interest rate hikes from the Bank of Canada has brought variable-rate mortgages higher, a report from Ratehub.ca Tuesday said. As a result, some variable-rate holders with fixed payments have hit their trigger rate, which means their payments only cover the interest on their loan and not the principal, which has resulted in elongated amortizations, in some cases 90 years. 

“Currently, extended amortizations are a concern facing variable-rate mortgage holders with fixed payments, but mortgage holders who locked-in at a historically low fixed rate during the COVID-19 pandemic may also be faced with similar challenges when they come up to renew their mortgage,” Penelope Graham, the report's author and director of content at Ratehub.ca, said in a statement Tuesday to BNNBloomberg.ca.  

“These borrowers will likely have higher mortgage payments or will have to extend their amortization.”