What a 25-Year Amortization Means to Canadians: BMO
Canadians will have saved over 179 million in interest by choosing a BMO mortgage with a 25-year amortization(1)
TORONTO, ONTARIO, Jun 21, 2012 (Menafn - MARKETWIRE via COMTEX) --On the heels of changes to the mortgage market announced today byFinance Minister Jim Flaherty, BMO Bank of Montreal is encouragingCanadians to ensure they understand the financial implications of thenew measures - including the benefits of choosing a 25-yearamortization.
What has changed?
- Amid rising concerns regarding household debt in Canada, the Federal
Government announced today that it is reducing the maximum amortization
for government-insured mortgages to 25 years from 30 years.
What does a shorter amortization mean?
- The amortization period is the length of time it will take to pay off an
entire mortgage. With a shorter amortization, you can save thousands of
dollars in interest costs and become debt-free faster.
How does a shorter amortization help improve the household balance sheet for
Canadian homeowners?
- The shorter the life of the mortgage, the less you pay in interest. A
maximum 25-year amortization can save thousands of dollars in interest
costs over the life of your mortgage.
- A shorter amortization period allows homeowners to begin building home
equity sooner. This equity can then be used to finance other important
life events, such as post-secondary education for your children, a family
vacation property or renovation and expansion of your current home.
- A maximum 25 year amortization also means you can have a mortgage burning
party sooner - allowing you to get a head-start on other financial goals,
such as saving for retirement.
Below is an example of how moving from a 30-year amortization to amaximum 25-year amortization can save you a significant amount ininterest:
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25-Year Amortization30-Year Amortization
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Mortgage Value 400,000 400,000
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Mortgage Rate(i)5 per cent5 per cent
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Bi-weekly Payment Amount 1,068.87 980.81
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Total Interest Costs 297,092.55 367,588.30
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Total Savings 70,495.75
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(i)The chart above assumes an average interest rate of five per cent over
the life of the mortgage
"With a 25-year amortization, you can throw a mortgage burning partysooner and put more money towards other financial priorities, such aspost-secondary education expenses or retirement," said Laura Parsons,Mortgage Expert, BMO Bank of Montreal. "Customers who have selectedthe BMO five-year fixed rate mortgage with a maximum 25-yearamortization so far in 2012 will have saved over 179 million(1)collectively by the time their mortgages have been paid off."
(1)Savings calculation is an approximation and is based on the totalnumber of BMO customers (new, refinance, renewals) who have taken aBMO 2.99%APR low rate fixed 5 year mortgage since January 1, 2012until May 23, 2012. Savings are based on (i) total interest savingsof these customers (determined as on the difference between 2.99%APRand the lowest published rate from a Canadian chartered bank for thesame time period or the customer's prior rate in the case of arefinance or an early renewal multiplied by the mortgage amount andthe 5 year term) plus (ii) amortization savings of these customers(determined as the total amount of BMO mortgages granted during thistime period multiplied by the percentage of customers who took a 30year amortization, divided by the average mortgage balance of thesecustomers and all multiplied by the average interest savings percustomer for the average duration of a 5-year term at 2.99%APR onthis average mortgage balance amount). The savings calculationassumes that no prepayment charges were payable by customers forrefinances or early renewals and that the difference in interest ratedescribed in (i) rate remains the same in the last 5 years of a 30year term. The Annual Percentage Rate (APR) for the low rate fixed 5year mortgage was 2.99%. APR assumes no fee(s) apply. If we requiredan appraisal, the appraisal fee would increase the APR.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is ahighly-diversified North American financial services organization.With total assets of 525 billion as at April 30, 2012, and more than46,000 employees, BMO Financial Group provides a broad range ofretail banking, wealth management and investment banking products andsolutions.
Contacts:
Media Contacts:
Matthew Duffin, Toronto
(416) 867-3996
matthew.duffin@bmo.com
Ronald Monet, Montreal
(514) 877-1873
ronald.monet@bmo.com
Laurie Grant, Vancouver
(604) 665-7596
laurie.grant@bmo.com
Internet: www.bmo.com
Twitter: @BMOmedia
SOURCE: BMO Financial Group and BMO Bank of Montreal
mailto:matthew.duffin@bmo.com
mailto:ronald.monet@bmo.com
mailto:laurie.grant@bmo.com
http://www.bmo.com
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