Need more time on your mortgage?

What are some pros of extending your mortgage?

More mortgage loan time means lower payments, offering certain benefits that can help you reach your homeownership goals:

• Monthly cash flow. Lower payments free up budget room to save, spend, invest, or pay off other debt.
• Buying a home. Lower payments can improve your income qualifying ratios, allowing you to enter the market as a first-time buyer, upgrade to a more desirable home, or buy a vacation or second home.
• Managing rental properties. If you own a rental property, the extra cash flow can help you cover expenses or mortgage debt not covered by rent.
• Building net worth. By the same token, managing multiple properties where a tenant is paying toward your mortgage debt, or having additional money to invest, can help you build net worth by allowing you to start sooner or grow your portfolio.
• Keeping a home. Lower mortgage payments can help offset higher rates at renewal, or allow you to refinance for additional funds.
• Leverage your start in a high-earning profession. Get the home you want now using an extended amortization strategy.

Like any mortgage product, an extended amortization is subject to financial or credit approval by the lender. Talk to one of our expert True North Mortgage brokers to help sort out your details and find your best extended mortgage fit.

Note: Net-worth building strategies should be discussed with a financial advisor familiar with your situation.

What are some cons of an extended mortgage?

Some things to know about an extended mortgage are:

• You may pay more interest over your mortgage lifetime.
• You may have more mortgage debt for longer — even into retirement.
• The longer debt is held, the longer it's factored into qualifying ratios for any other loan or debt approval, including car and personal loans.
• Holding debt for longer can also impact your ability to save or pay down other debts.
• Extending at renewal is technically a refinance, which means losing insured mortgage status if you had it, and, therefore, access to lower insured mortgage rates.

Let's take a look at a simple illustration of the potential monthly payment relief and additional interest costs of an extended mortgage:

Home purchase price of $425,000 with a 20% down payment (uninsured mortgage), 5-year fixed rate at 4.59%

• Over a 25-year amortization — your monthly payment would be about $1,898, for $229,656 in total loan interest paid.
• Extended over a 30-year amortization, your monthly payment would be about $166 lower at $1,732, for $283,585 in total interest paid — an additional $53,928 in interest.
• For a 40-year amortization, your payment would be about $360 lower (-20%), for $398,593 in total interest paid and $168,937 more interest.

Note: Interest rates are likely to change over a mortgage lifetime, impacting the total interest paid. The above illustration doesn't factor in additional payments made on principal.

Can you reduce the extended interest paid?

Yes, you would have that flexibility, assuming your mortgage contains a feature called pre-payment privileges, which allow you to reduce your principal during your term without penalty, over and above your regularly scheduled monthly payment. This strategy can help you offset the extended interest costs later if you have the funds.

The additional amounts can be added to your mortgage payments or paid down in lump sums up to an annual maximum, which depends on the lender:

• Pay more down on your principal as you go, through lump sums or adding to your mortgage payment, within your term's allowable pre-payment privileges, to reduce your extended amortization and save on interest costs.
• At renewal time, you may be able to put down an even larger lump sum without penalty to reduce your mortgage loan time further.
• A higher pre-payment allowance, for example, 20% annual privilege vs some big bank allowances of 10%, can offer you greater flexibility in reducing your principal.

After lump sum payments, at renewal time, you'll have the option to ask your lender to shorten your amortization officially.

If you do, your monthly payments will likely rise compared to the extended time — or you can keep your extended payment schedule and keep paying down your principal to pay off your mortgage faster.

How do standard and extended mortgage payments compare?

Roughly compare your payments with our Extended Amortization Comparison Calculator below. Or click one of our Mortgage Payment Calculators (buttons below) to enter more details, such as for a down payment or renewal.

Your mortgage situation is unique — for your specific numbers, apply now or talk to a friendly, expert True North broker in your preferred language.

What circumstances allow a 30-year amortization?

You may be able to extend your mortgage to 30 years if any of the following apply to your situation:

• Buying your first home or next home with a conventional mortgage loan (20% or more down payment)
• As an eligible first-time homebuyer with an insured mortgage (less than 20% down payment)
• Buying a newly built home with an insured mortgage
• Getting a Purchase Plus Improvements mortgage
• If you have enough equity built up in your home, you can extend your mortgage by refinancing at renewal (you'd lose insured mortgage status if you still have it)
• You can ask for an extended mortgage if you refinance for other reasons, such as debt consolidation or needing extra funds for investment

A 30-year amortization is available for the above circumstances at most traditional lenders.

Where can you get a 35 or 40-year amortization?

If you have a mortgage with at least 80% LTV (qualifies as an uninsured mortgage), and want an extended amortization, you have options.

Traditional lender

Big banks and most traditional A-lenders can only offer up to a 30-year uninsured mortgage.

However, at True North, our clients can now access a traditional mortgage that can extend up to 40 years through our in-house lender, THINK Financial.

Our Extended Mortgage offers prime rates (A-lending) and flexible features, including 20% annual pre-payment privileges to help you pay more down later, if you have the funds.

Alternative lenders

In our suite of lenders, our expert brokers have access to alternative lenders that may offer extended amortizations up to 40 years. These types of lenders typically charge higher interest rates and may have restrictions or less flexible pre-payment privileges.

However, Compass Mortgage is our alternative product that may offer you greater flexibility and a more cost-effective solution compared to other alternative lenders. This product allows extended income qualifying ratios, competitive alternative mortgage rates, and flexible features, like generous 20% annual pre-payment privileges — with amortizations up to 40 years.

Great advice puts time on your side.

No matter your details, we put you first, not the lender. And for your extended mortgage, we help ensure you get the best rate and product for your unique situation.

Our salaried, highly trained brokers quickly sort out your details, outlining solutions that make your decisions clearer and help time work in your (mortgage) favour.

Anywhere you are in Canada, we're here to help. Give us a shout online, over the phone, by email, or drop by a convenient store location near you.