Here’s how much less you’ll pay with a 30-year mortgage in Niagara

If you plan on purchasing a home in the Niagara region, choosing a 30-year mortgage will save you a little bit of money each month–but not a dramatic amount. 

Real estate website and brokerage Zoocasa recently released a report that breaks down how much less Canadians might pay if they opt for newly announced 30-year amortizations over 25-year mortgages.

In the Niagara region, where the home price index composite benchmark price hit $640,200 last month, the monthly savings are somewhat more modest than in costlier markets.

According to the report, homeowners who opt to take 30 years to pay off their mortgage are looking at spending $2,692 a month, a little less than the $2,974 they’d pay with a 25-year amortization (assuming the house costs $700,134 and the buyer puts down a 20 per cent downpayment of $140,027). 

But while buyers will save $282 a month, a longer-term loan comes with increased interest. 

“While longer amortizations will help more people qualify for a mortgage and manage their monthly payments, they also mean the buyer will pay more in interest over the life of the mortgage,” the report reads. 

“For instance, a recent Zoocasa analysis showed that the difference in interest paid between a 25-year mortgage and a 30-year mortgage could be upward of $100,000 in Toronto, Vancouver, Ottawa, and Kitchener-Waterloo. This is an important factor home buyers should consider when deciding whether to choose a 30-year or 25-year mortgage.

But while interest payments will be increased, the report suggests the move to offer longer-term mortgages–which will go into effect on Dec. 15, 2024–will allow more first-time buyers to enter the housing market. 

“This could be a game changer for younger generations eager to enter the housing market,” said Carrie Lysenko, Zoocasa CEO, in the report. 

“By extending amortization periods and raising the insured mortgage cap, a greater number of Canadians will have the opportunity to buy in more competitive and higher-priced markets like the Greater Toronto and Greater Vancouver areas, thus making homeownership more accessible in regions where it has previously felt out of reach.”

Other changes to lending rules will also come into effect before the end of the year, as the government also pledged to increase the price cap for insured mortgages from $1 million to $1.5 million. 

The report says that under current rules, buyers looking to purchase homes in more expensive markets such as Toronto, Mississauga, Milton and Burlington must put at least $200,000 down, as the average home price is over $1 million. 

Zoocasa says this rule limits many GTA buyers to smaller homes, mostly condos and townhouses. 

“By raising the insured mortgage cap, the new rule aims to make it easier for buyers to access insured mortgages with smaller down payments, reducing the initial financial burden and potentially opening the market to more first-time homebuyers,” the report reads.