30-year mortgages: Good or bad? (with radio ad)

Long version

For many Canadians, buying a home is the largest financial commitment they’ll ever make. With high housing prices, affordability can be a major concern. 

Since August 2024, first-time home buyers have been able to spread mortgage payments over 30 years, which is 5 years longer than the previous maximum of 25 years. The rule enables lenders to offer 30-year amortizations on insured mortgages (i.e. high-ratio mortgages where their mortgage amount is greater than 80% of the purchase price) for first-time homebuyers purchasing new builds. In December 2024, the measure was expanded to include all first-time homebuyers as well as all buyers of new builds. 

What's good about 30-year amortization? 

Why would someone want to take 30 years to pay off their mortgage? The main reason most homebuyers would want a longer amortization period is to lower the monthly cost – all else being equal, extending the total time to repay a mortgage lowers the monthly payment, thereby making the it more affordable to carry the mortgage. Since many mortgage approvals are based on cash flow, lower payments may enable the borrower to qualify for a more expensive property. 

For instance, a $500,000 mortgage at a 5% interest rate. Amortized over 30 years, monthly mortgage payments would be $2,668 per month. Amortized over 20 years, monthly mortgage payments would be $3,286. This $618 monthly difference can make a significant impact on monthly household budgets and may help buyers qualify for more expensive homes. 

So what's the downside? 

This sounds like great news, but while extending the amortization of your mortgage can lower your monthly costs, it can also significantly increase your total cost of borrowing and the total amount of interest you end up paying over the duration of the mortgage. Over 30 years, the total interest paid would be $460,643—far more than the $288,550 paid over 20 years. This extended debt burden could hinder progress toward other financial goals like saving for retirement or investing. 

What's right for you? 

Ultimately, while a 30-year mortgage can improve short-term affordability, it comes at a long-term cost. What you do depends entirely on your unique situation. 

Before you obtain a new mortgage, or renew an existing one, talk to your financial advisor about how the choices you make could impact your financial strategy.

This content was provided by Edward Jones for use by (FA's NAME), your Edward Jones financial advisor at (branch address or phone #).

Edward Jones, Member - Canadian Investor Protection Fund

Number of words: 381

Short version (radio/print/online)

Since August 2024, first-time homebuyers of new builds have been able to access 30-year amortizations on insured mortgages. Later, in December, the offering of 30-year amortizations was expanded to ALL first-time homebuyers and all buyers of new builds. This change aims to make homeownership more attainable by reducing monthly payments. 

For example, a $500,000 mortgage at 5% interest over 30 years results in a monthly payment of $2,668, compared to $3,286 over 20 years. While this lowers monthly costs and improves affordability, it also increases the total interest paid—$460,643 over 30 years versus $288,550 over 20 years. 

Longer amortizations can also delay other financial goals like retirement. Before choosing a 30-year mortgage, you should weigh the benefits of lower payments against the long-term cost of borrowing and consult a financial advisor.

This content was provided by Edward Jones for use by (FA's NAME), your Edward Jones financial advisor at (branch address or phone #).

Edward Jones, Member - Canadian Investor Protection Fund

Number of words: 132 (excluding FA’s name, address/phone number)