Mortgage industry divided on even longer amortizations

2026 will mark two years since the federal government’s move to introduce extended 30-year amortizations for insured mortgages, an effort to help homeowners lower their monthly payments and improve the dire housing affordability picture facing Canadians.

That change has been generally well received by the mortgage industry, credited with helping borrowers manage higher interest rates at renewal time and giving a slight boost to buying power for those trying to enter the market.

But a prominent British Columbia-based mortgage broker says it still hasn’t been a radical enough move, with much longer amortizations needed for the housing market to truly get back up and running again.

Sharnjit Gill, a broker with Superior Mortgage in Vancouver, told Canadian Mortgage Professional he didn’t see the affordability outlook shifting until the government upped the maximum length of a mortgage amortization well beyond its current level.

In his view, even a 30-year amortization period isn’t sufficient for first-time buyers grappling with a huge spike in home prices in recent decades.

Forty- or fifty-year amortizations: are they popular elsewhere?

Forty-year government-guaranteed mortgages were briefly available in Canada in 2006, but feds nixed that program in 2008 amid the housing market meltdown in the US.

In July 2008, the federal Department of Finance cut the maximum amortization for government-backed insured mortgages from 40 years to 35 years, a limit that was then shortened to 30 and 25 years in the following years.

Gill said rampant home price appreciation in major markets means the recent switch back to a maximum 30-year amortization isn’t sufficient to move the needle for first-time homebuyers.

In the early 2000s, “people wanted to buy because it was easy to make payments, and that’s why the market was doing well,” he said. “But now a house [in Vancouver] is $1.2 million, $1.3 million, and the interest rate is so high.

“So there’s only one solution: if the amortization is not [increased] to 40 years or 50 years, the confidence of the buyers will not be there.”

Gill pointed to the prominence of longer amortization periods in other countries as a reason Canada should embrace a similar idea.

Japan remains a benchmark for ultra-long mortgage terms, with contemporary products including 50-year “flat” loans for qualifying long-life housing.

In the United States, the Trump administration drew headlines last year by floating a 50-year mortgage guaranteed by Fannie Mae and Freddie Mac – but that proposal doesn’t look likely to move ahead, having gained little traction since it was first mentioned in November.

Longer amortizations a divisive idea in mortgage industry

Common concerns around longer mortgage terms include borrowers being indebted to their lender for longer and almost certainly paying out more in interest than they otherwise would with a shorter term.

Gill, though, believes borrowers would use the opportunity to pay a higher amount than their monthly payment when they can – and sees the lengthier amortization period mainly as a way of ensuring they qualify for the mortgage in the first place.

“If it’s 30 years or 40 years, the client needs to pay the mortgage,” he said. “So it will be easier for buyers to make the payment, and there’s also the opportunity to make the payment before – or on the due date, they can pay the mortgage as much as they want. So there are some ways to pay early.”

For now, chances of the government extending the maximum amortization period again appear distant – and Trump’s proposals south of the border for a 50-year mortgage were greeted negatively in Canada.

Dan Eisner of True North Mortgage said in November that Canadians “probably won’t see” a mortgage of that length, and doesn’t view it as a realistic prospect here.

“Having a 50-year amortization really means you could die with a mortgage,” he said. “So many Canadians use their home as their life savings, and this is not a good business plan. It’s not a good retirement plan. It’s not a good financial plan. For many, it’s a debt-trap scenario.”

Source CMP
By Fergal McAlinden