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Extending Your Mortgage Amortization: Qualifying for a Higher Home Purchase Price

Does the higher mortgage stress test have you feeling down? One of the ways to increase your maximum home purchasing power is by extending your amortization period. If you’re putting down at least 20% on a home, you can extend your amortization period longer than 25 years.

Amortization

25 vs. 30 Year Amortization

When deciding to go with a longer vs. shorter amortization period, it’s essential to understand the pros and cons.

The pro of going with a longer amortization period is that you can afford to spend more than you otherwise would on a home. The con is that it could cost you thousands of dollars extra in interest by extending your amortization period by just five years.

If you’re looking for the most competitive mortgage rate, generally, that’s a mortgage with a 25-year amortization. However, that comes at a cost. Your payment will be calculated as if you’re paying it off over 25 years. If you’re buying in a more affordable market, that can be fine. However, suppose you’re buying in the most expensive markets like Calgary, Toronto and Vancouver. In that case, it may be challenging to qualify to buy a property there, where every dollar of affordability tends to count.

There isn’t usually a big difference between the mortgage rate on a 25-year versus a 30-year. The mortgage with the 30-year amortization usually only has a rate of about 0.10% higher than the 25 years.

If you can spend $70k more on a property by going with a 30-year amortization, then going with a longer amortization may make sense for you.

35 Year Amortization

But it doesn’t end there. Did you know that you could get a mortgage with an amortization period of longer than 30 years? For example, you could get a mortgage with an amortization period of 35 years.

Again, if you’re buying in a market where every dollar counts, a mortgage with a 35-year amortization can be pretty helpful in increasing your maximum purchase price. You may be able to spend another $70k on a property.

Remember that the mortgage rates will be even higher, and there could be lender fees (1% or 2% of the mortgage amount).

Before choosing this option, you’ll want to ensure you can afford the payments and fees.

How the Canadian Mortgage App Can Help

With the Canadian Mortgage App, you find out how much you could afford with a longer amortization period.

Using the Simple Mortgage Calculator, you could drag the amortization bar and see how it will affect your mortgage payment and how much you can afford to spend on a home.

What are you waiting for? Download the Canadian Mortgage App today to try it out.

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