This is a very common question from home buyers.  Most are gun shy when it comes to 30 and 35 year amortization but in my mind, it is a matter of creating flexibility – you’ve earned it!

The debate has been that the small percentage of home buyers who have 25+ year amortizations are those that have been shoe horned into a mortgage that is likely just out of their reach.  While I agree that this tool is sometimes used inappropriately it can be a great cash flow tool if used correctly.

When combined with pre-payment privileges, it can give homeowners piece of mind and flexibility without causing unnecessary credit card debt.

It is true that some individuals will blow all of the additional cash flow on consumables but many others are productive with these extra funds, using them to:

  • Invest in higher-returning assets
  • Pay down higher-interest debt
  • Fund education or childcare expenses
  • Provide supplementary cash flow while on maternity leave
  • Top up RRSPs
  • Pad a contingency fund (especially useful for commission earners with volatile income)
  • Invest in their own businesses
  • Pay medical expenses
  • Finance value-added renovations or preventative-maintenance projects
  • Maximizing income property cash flow
  • Provide payment relief in case rates soar by the time they renew
I cannot say it enough, with mortgage rates as low as they are now, despite their recent slight increase, this is the cheapest money you will get in the market!  Pay off, or better yet don’t accumulate, high interest credit card, line of credit and personal loan debt first.  With any remaining funds, pay down your mortgage.
 
The math is simple, you’ll pay less in interest over the long term and you will have far less financial stress.
 
To talk about how you can de-stress yourself, contact me!