By Letter to the Editor on September 9, 2021.
Writer D. Ryane’s letter to the editor of Friday, Aug. 27 contained some inaccurate information on mortgages. The writer is obviously confused about amortization and term and is likely to inflict hs confusion upon some readers.
Very simply, when the writer refers to a 40-year mortgage, he believes it has a 40-year term. Not so.
When a borrower negotiates a mortgage, both amortization time and term of the mortgage are negotiated. Amortization is the time it takes to pay off a mortgage; in many cases it may be 25 or 30 years.
At the present time, some common mortgage terms may be for a six-month or up to a five-year term, during which time the interest rate (assuming a fixed rate) does not change, nor do the principal payments change. At the end of the term, a balance remains on the mortgage and a new term is negotiated.
You can therefore see that a mortgage amortized over 40 years may have many “terms.”
The CPC are suggesting that a 10-year term could help the borrower by creating more certainty for the borrower by keeping payments the same for 10 years instead of a shorter period of time.