Rob Carrick says focusing strictly on newly built homes reduces the risk that opening up 30-year mortgages to more buyers will stoke demand and push prices higher
Of all the measures the housing measures federal government has announced lately, the one with the most immediate impact will be expanding the availability of 30-year mortgages.
To get a sense of how broadening of the 30-year mortgage will affect the marketplace, I checked in with mortgage broker Victor Tran of True North Mortgage. Mr. Tran’s clients are in the Toronto area, where the average home price is above $1-million. He said eight in 10 of his clients come in with a down payment of 20 per cent or more, often to secure a 30-year amortization. Also, on houses costing $1-million or more, 20 per cent is the smallest possible down payment.
Mr. Tran also noted the potential for developers to increase prices if demand for newly built homes increases. As for the impact of amortizing a home over 30 years instead of 25, he pegged the savings at about $250 per month on a $500,000 mortgage at a 5 per cent rate. “Every bit of savings helps,” he said.
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