The pros and cons of a 40-year mortgage

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  1. JC says:

    I took a 40-year mortgage, immediately increased my payments and I am now on track to pay it off in 27 years. But should I ever need to reduce my payment back to the lower 40-year payment, I can without penalty. It’s a good strategy just in case something happens to your income.

  2. Mike says:

    Have you looked at housing prices recently? To buy anywhere in the GTA, you would not only need a 40-year mortgage, but the rights to your first born, jobs 2-3 (not only dual-income families but sometimes triple or quadruple incomes) to find a 1,500 sq. ft. $500,000 bungalow south of Steeles. Oh don’t forget the privilege of paying the two (2) land transfer taxes by way of City of Toronto council, the vehicle registration tax because you live somewhere with an “M” postal code, and the outrageous taxes Miller implements because of the 905ers travelling into our city to work.

  3. Dave says:

    The reality today is that house prices are far more expensive than they have ever been in terms of income levels. Thirty- or 40-year mortgages are the only way that many of us (newly graduated or people with young children) can afford to enter the housing market, especially if we want to live in Toronto versus the far-off-commuter-nightmare-suburbs. That’s a fact. While I agree that it may take longer for us to pay them off, at least we have a home that we can call our own. This is something I think most people want. It appears that those against 40-year mortgages loans have either bought their homes when prices were more reasonable or who have paid them off.

  4. adam says:

    Borrowers have a responsibility to be informed of their financial options, and make appropriate decisions. This is just one more financial tool available to the public. If you are unrealistic about the mortgage you can afford, or how long it will take you to pay it back, then you deserve to get burned. Let the market dictate what types of mortgages are offered.

  5. S. Upper says:

    Of course! Not all of us look at as a house strictly as an investment. We want to raise our families in a comfortable environment. Sure we could live in an apartment but we want a backyard for our child to play in. We want to be able to have family friends over to spend the night. The 40-year mortgage allows people like me to live in a nice house and still maintain a decent lifestyle. Mind you, we had to move to Scarborough to find value for our money but that’s beside the point.

  6. Peter- Hamilton says:

    I have a 40-year mortgage. I even took 100 per cent financing. Shocking. But guess what? With accelerated payments, which are low and affordable, my 40-year mortgage is actually 31 years. The other thing, I didn’t buy in an overheated Toronto market because – guess what? – 450 grand for 700 square feet is ridiculous.

  7. Bill says:

    I agree that lenders should be allowed to offer 40-year mortgages, but I feel that these mortgages should come with warnings and more education for the consumer. Ellen Roseman did the math in her column, but how many banks are pointing out these stats to their customers before they sign for a 40-year mortgage?

  8. jeff says:

    The 40-year amortization allows buyers to get into the market earlier because the lower monthly payments qualify them for a larger mortgage. By taking a 40-year amortization you are not obligated to pay your mortgage off in 40 years. As the dollar value of your mortgage goes down due to inflation, and your income increases, you may increase your payment amount gradually over time, which will pay the mortgage off more quickly. Most mortgages also have the option of lump-sum payments, which can be exercised on any payment date and are applied directly to the principal balance owing.

  9. WW says:

    When will people realize that these are products that are not in their best interest. Bite me once, shame on you. Bite me twice, shame on me. It is this “I want everything now” attitude that keeps many people from having “anything.”

  10. Bill, Oakville says:

    While there are many dangers with a 40-year mortgage, with careful financial planning they can help you get more house sooner. What the article does not point out is that if you are confident that you will be increasing your annual income in the future, a 40-year mortgage could allow you to avoid having to “move-up” to a larger home as your income grows. This could potentially save you thousands of dollars in real estate fees, land transfer tax, etc. Lenders should definitely be allowed to offer these types of mortgages since they have a vested interest in ensuring people can afford such type of mortgages.

  11. Deb says:

    As a homeowner, I can relate to the younger generation entering the world of homeownership. Who can afford a mortgage of $300,000 +? Housing costs have risen so much in the last 10 years I cannot fathom what the younger people are going to afford even in the coming years. But paying off a mortgage of this amount in, what, 25 years? Very hard to do, extending it would probably be the only solution. So yes a 40-year mortgage is reasonable.

  12. J.W. says:

    No. A 40-year mortgage only encourages people to live in a cycle of debt. My father saw his parents lose their home in the depression. He was adamant that was not going to happen to him. He taught us “live frugally, pay off the mortgage as fast as you can, don’t ever let anyone put a debt against your home and once the mortgage is paid you can comfortably enjoy the fruits of your labour.” We have adhered to that philosophy and sleep peacefully at night knowing that as long as we pay our property taxes nobody can ever take our home away from us. Too many people want to have it all NOW, the big house, the flashy car(s), expensive holidays without ensuring that they have a secure roof over their heads first, swimming in a sea of debt. Not the way I want to live.

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