Longer amortization periods for first-timers will help brokers broaden their client base, but a number of industry players believe it may not necessarily be a good move.
“With rates as low as they are it would be easier for clients to qualify; however, I like 25 year amortization periods because buyers can build equity quicker,” Jonah Wright of Mortgage Intelligence
told MortgageBrokerNews.ca. “The applications I usually get from first-timers are from people who are buying later in life, so I don’t know if longer amortizations would benefit them.”
The Canadian Home Builders Association is calling for longer amortization periods for first-time buyers. The Globe and Mail has obtained government documents that show the CHBA had 61 meetings last month with officials and politicians to discuss proposals including longer amortization periods for first-time homebuyers.
Of course, the Canadian government has shortened the maximum amortization period for Canadians in a number of different measures meant to cool the housing market.
And while brokers’ initial sentiment may be to support the CHBA’s recommendation, certain players believe more thought and care should be put into the decision.
“You can look at it in two ways – extending the amortization period would open up the market to a lot more people to qualify,” John Papadopoulos of Verico
Advent Mortgage Service told MortgageBrokerNews.ca. “On the other hand if rates go up it could put people in a bad financial position.”
Papadopoulos admits it will create more clients, but he also suggests a tiered system if the government does decide to consider the CHBA’s recommendation.
“If they want to extend the amortization period they should do it at certain points,” he said. “For example, clients should be required to put down more than five per cent to qualify for a longer amortization to ensure they have more skin in the game.”