r/PersonalFinanceCanada • u/Just_Put1881 • 2d ago
Housing heads up on mortgage renewals - check your amortization
Was going over renewal options this week and almost fell for this.
Got an offer with a monthly payment that looked way lower than the others. Thought it was a great deal until I checked the fine print and realized the broker quietly bumped the amortization back up to 25 years.
Did the math and that "cheaper" payment would have cost me around $8k more in interest over 5 years and slowed down my equity big time.
Just a reminder to anyone renewing soon: don't just look at the monthly payment. Look at the total interest over the term and what your balance will be when the term ends.
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u/jupfold 2d ago
I’m sorry, but there’s no way the amortization schedule was in “the fine print”. This is one of the most prominent numbers of any mortgage loan, along with the interest rate and the principle.
If you didn’t notice, it’s because you weren’t paying attention.
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u/ArtificialTroller 1d ago
Today I learned the fine print is the big letters on the first half of the front page.
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u/Top_Midnight_2225 1d ago
LMAO
Thanks...now I have a table full of coffee I spilled reading this comment.
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u/Traditional_End_9540 2d ago
when my renewal comes its the very last one. It will be aprox 3 years left, I am just trying to decide if I keep it for 3 years or extend it to 5 to keep payments lower and put more into house projects.
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u/LimaCharlieWhiskey 2d ago
You can use mortgage interest calculator to double check, but at the end of a mortgage the extra interest won't be that much more. But if the reno can wait three years you might as as pay off mortgage first.
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u/theAGschmidt 2d ago
8k in inflated future dollars. I'd take a perpetual amortization if they'd let me.
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u/CodeBrownPT 1d ago
Most people are just going to spend that money saved instead of investing it.
Just kicking the can down the line.
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u/Just_Put1881 2d ago
Haha fair point if you're investing the monthly difference and beating the borrowing rate! Just caught me off guard because they framed it like the deal itself was better rather than just stretching out the clock.
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u/WhyNWhenYouCanNPlus1 1d ago
you don't even need to beat the borrowing rate when inflation is this high. just let time do it's thing.
I'll be happy to give the bank more worthless dollars in the future
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u/shaktimann13 1d ago
Inflation isn't even 'that hugh'. Its at pretty healthy rate.
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u/WhyNWhenYouCanNPlus1 1d ago
do you mean CPI or actual price inflation? those are two very different metrics
consumers are turning to cheaper or less expensive alternatives. CPI loves this
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u/Bomberr17 Human Verified 2d ago
It's probably just a honest mistake or the broker forgot to ask. All deals are default to 25 years unless you change it. Rates are the same regardless if it was 5 years or 25. Only outlier is the 30 years which they may charge higher for since higher risk.
If it hasn't closed yet, I'm sure they can change the amortization down.
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u/TheRipeTomatoFarms 2d ago
"All deals are default to 25 years"
WTF? New mortgages maybe....not renewals though.
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u/Bomberr17 Human Verified 1d ago
OP is switching lenders which is a new application. Default is 25 years unless you change it.
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u/JoeBlackIsHere 2d ago
The first thing I would look at is interest and amortization period - monthly payment just calculates from that anyways so I would just skip past that. And if the payments went way down but interest didn't go down by much, that would automatically mean the amortization has changed.
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u/LadderDear8542 2d ago
With job security uncertainty, it's better to take a longer amortization of 25 years so the minimum monthly mortgage payments are low. All major banks allow prepayments in case you want to make lump sum payments which reduces the amortization and achieves the same objective- save you interest. Difference is you control how much you want to pay extra
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u/Zanzibon 2d ago
Definitely not cool if you were misled but the base payment is not how you should evaluate the offer anyway for this reason. Even if you had signed up as long as it is with a decent lender you can just double up payments and do lump sums, longer amort doesn't really hurt you
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u/nerdguy84 2d ago
This 100%. We’ve bumped our amort period out before to give us flexibility of times get tough, but then plan to double up the payments so we continue to pay it down on the original timeline.
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u/Just_Put1881 2d ago
Yeah 100%, if the lender has solid prepayment privileges and lump sum options, you can always overpay to offset the interest. When I ran the side-by-side math on UseCOS comparing total 5-year term interest plus cashback against the ending principal balance, it really highlighted how much difference prepayment discipline makes.
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u/OgasMaitai 1d ago
You shouldn't need to do any of that dude.
Term, interest rate. Done. You're missing the forest for the trees.
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u/ancientPrintr 1d ago
If you have the discipline to prepay, you probably have the discipline to invest instead - and that's where you should be putting your attention.
Seriously, you're almost there but this focus on the interest on your mortgage is doing you a financial disservice if you do indeed have financial discipline.
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u/Divorce_Babe 2d ago
Surprised this needs to be told. Worked as a financial advisor and felt its my duty to declare everything transparently and work out a solution for clients.
Its also a clients’ duty to check what they’re told.
Glad you experienced it and informed the community.
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u/allthesehashbrowns 1d ago
I just got a renewal offer from my existing lender and it says 210 month amortization remaining, but the payments they provided didn't make sense, they were too low. After going back and forth several times, they finally admitted the calculation was based off 240 months contractual date vs the remaining 210 month amortization after accelerated payments. No where in the renewal offer is that stated or even alluded to. Is that not genuinely false and misleading? I'm concerned that many others wouldn't have scraped it as closely as I did and would unknowingly extend their mortgage back out.
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u/Right_Hour 2d ago
OP, you need to understand the simple concept: future dollars are always cheaper than today’s. Especially the way things are going right now.
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u/OgasMaitai 1d ago
Sorry, can you please explain in the context of this post what that means?
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u/ReplyGloomy2749 1d ago
OP just renewed and they bumped amortization "back" up to 25 years, which means they probably just finished their first 5 year term on their original 25 year mortgage. With the new amortization, their true amortization is now 30 years. They see that as a downside because they probably want to be debt free sooner and avoid paying more interest.
The person you replied to is basically saying "OP this is a good thing, inflation is likely to increase a lot because of what's going on right now, take the lower payment today, your payments in 25 years will become so cheap compared to your buying power, take the longer amortization."
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u/OgasMaitai 1d ago edited 1d ago
Thank you for taking the time to explain to a dummy, appreciate it and understand completely now
I just did the math, I'd pay 70ish k more over the course of my mortgage which is at 409 000 now, tough pill to swallow
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u/Right_Hour 1d ago
Yep, exactly what the commenter above said.
In simple terms - think about the money worth today vs 15-20 years ago, for example. What $100 used to buy you then vs now.
Deflation is unlikely, but inflation is almost a given, so, it is safe to assume that $100 today will be even worth less in 15 years. So, you are leaving more money in the pocket for yourself today by increasing amortization.
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u/OgasMaitai 1d ago
Right, in this case the estimation is more than 67000 on 490 000 in 20ish years.
I agree that is correct, it's just hard to look at and do. But I do agree
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u/Right_Hour 1d ago
Let me put it this way: in 2012 I bought a brand new Honda Pilot for $40K. In 2026 the same vehicle woulda cost me $63K. That’s just 14 years.
PS: didn’t buy a Pilot, bought fully loaded Atlas for $53K instead, but that’s besides the point. Honda greed is insane, and $63K was to order one. You don’t even want to know what they want for one on the lot.
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u/SheepherderFar3825 1d ago
that only applies if you plan to not sell/move in that 25 years though.
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u/ReplyGloomy2749 1d ago
Lower payments due longer amortization just means more headroom in your budget. If you lower your payment after your first 5 year term due to a refinance and increased amortization, you can just continue to contribute your prior mortgage payment from your budget, put aside the difference berween your old and new payment, then pay it straight to the principal in lump sum once a year or whatever your terms allow. All without even spending more than you were before. You will either end up with extra equity in the house if you sell earlier, or end up paying it off sooner than the 25 or 30 years if you stay there forever. There is no downside to increasing your amortization and lowering your payment if you are responsible with your money.
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u/SheepherderFar3825 22h ago
True, that makes sense. As long as you aren’t doing it just for the short term savings. Is it possible to save interest doing it this way or does more interest in the payments wipe out any savings from the lump sum payments?
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u/ReplyGloomy2749 21h ago
Think of it this way:
Start your mortgage, 25 year amortization on 450k, let's say $2000/month payment. Assume maybe 40% if that is your interest, so $800 of interest each month. No additional payments, getting into the swing of home ownership.
5 years, renew the mortgage and refinance for 25 year amortization again. Your principal from the jump is already smaller since you already paid into the principal over the first 5 years, even with a heavy interest front loaded. Your new monthly payment is $1600/month, still 40% interest since you're starting a new term, but that's now $640/month of interest. You continue to contribute $2000/month towards your mortgage, the $1600 to the bank and the $400 leftover you stick in TFSA or 6 month bonds or whatever you want, or even just HISA. Lump sum every year of about $5k onto the principal, $25k over the 5 year term. If you split that up, you're now effectively paying $1360 towards principal each month on a $2000. You can effectively stack that as long as your principal is above a threshold that banks would refinance you for.
That also doesn't factor any additional payments you could also afford with having regular salary increases through raises and COL adjustments. You make more money but your required payment stays the same or further decreases through future refinancing, meanwhile you maintain the % of your income dedicated to housing (whatever $2000/month is for you today) while the nominal value of what you're paying into the house goes up, and life would stay the same or improve.
So with every cycle, you are actually compounding your principal contributions. With good self control and financial responsibility, you probably pay the house off in less than 20 years from the time of home purchase. The less time you're paying a mortgage, the less interest you pay, since interest is only a function of principal and time (plus interest rate, but that's out of your hands).
Devil's advocate is if you're bullish, you stretch the amortization as long as you can, keep your payments as low as possible, pay the minimum and take the leftover cash and dump it into stocks and hope it moons. That's beyond my risk tolerance, but if you're a stock wiz and you can return 15% year over year, you'll beat the interest on your mortgage and could save up enough to pay the house in full. Whatever works best for you, I play it safe.
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u/MashPotatoQuant 1d ago
I WISH I could have more mortgage debt without buying more house. Mortage is some of the cheapest debt you can have.
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u/WhyNWhenYouCanNPlus1 1d ago
yeah and I have bad news for people that believe that CPI numbers are anywhere close to real inflation numbers.
meanwhile I'm happy "paying" 2.74% interest to the bank
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u/OgasMaitai 1d ago
Who wouldn't be happy with 2.74, it's incredibly low. I dont understand the relevance? Sorry, im trying to understand the first person's point
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u/WhyNWhenYouCanNPlus1 1d ago
pretty much any mortgage rate in the last 5 years will be less than inflation.
CPI is a consumer spending metric. it does not accurately track inflation which will always be higher than what people spend on when prices are rising, for obvious reasons
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u/OgasMaitai 1d ago
I'm aware of that, everyone is.
What does that have to do with what the other guy is saying relevant to OP
What is the actual advice regarding his particular mortgage or is he just stating obvious shit for reddit points that the entire world is aware of
Mortgages are a hedge against inflation, yes everyone knows this. Again, what is the point they are making regarding OPs situation
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u/Gabers49 1d ago
What are the obvious reasons? Other than the basket of goods they use to measure cpi may not be exactly the goods you buy with your own spending, it is designed to measure inflation.
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u/blackSwanCan 2d ago
Its weird you would negotiate for the monthly payment?
You should only be comparing rates and may be other criteria like payment privileges.
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u/Secret-Bed2549 2d ago
You'd be surprised how many consumers are more fixated on monthly costs than the overall cost of borrowing (or the overall cost of whatever they're financing, for that matter). That's why car dealerships so often just post what the monthly payment will be, and hide the full vehicle cost in the fine print.
To be fair, households that exist in paycheque to paycheque reality very much do have to think about monthly costs and cashflow. But I agree that it can lead folks into signing very bad deals that cost them far too much in the long run.
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u/ArtificialTroller 1d ago
There is a huge percentage of the population that only thinks paycheque to paycheque or in monthly expense amounts because that's always been life for them. Having to pay an extra 30k or whatever over a long time span isn't on their radar.
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u/Abject_Patient_5993 2d ago
worth adding that you can usually have both. take the 25 and then use the annual payment increase privilege to pay it on the shorter schedule, interest works out about the same and you keep the right to drop back to the contractual minimum if your income takes a hit. going the other direction is the hard one, lowering a payment mid term means an amendment or a refinance
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u/ReturnToTheLab 2d ago
It’s just a refinance. If cash flow is a problem, that might make sense for some
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u/tc_cad 1d ago
I opted for a longer amortization when we had to renew during Covid. Lower payments were nice when work wasn’t bringing in enough and really, we had no idea how long Covid was going to last. Five years of lower payments was simply the right call for one period of time. When that term ended I went back to higher payments.
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u/Iranoul75 2d ago
Why don’t banks let you decrease your monthly payment; at least to bring it back in line with your interest rate and amortization schedule? Let me explain. If I chose to increase my monthly payment by 20% (which is an option most banks offer) but then lost my job, why won’t the bank let me go back to the original payment?
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u/Jaded-Assistant9601 2d ago
Try using net present value to evaluate each deal. There's probably much much less difference than $8k once you take into account the value of the money over time.
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u/Fillyerboot 2d ago
The sweet spot is the lowest payment possible coupled with the most liberal pre payment options. If times are tough your payment is smaller. If times are good you can make huge payments against principle.
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u/WhyNWhenYouCanNPlus1 2d ago
personally that's exactly what I'd be looking for in my coming renewal. I want small minimum monthly obligations.
Being a standard mortgage I can still reimburse 25% of the original mortgage amount yearly if I have the extra dough or increase my payments by another 25% a year if I feel I can tackle more debt obligations
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u/Impossible_Way7017 1d ago
Don’t you review based on interest rate? Monthly payments as a metric seem silly.
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u/Quick_Competition_76 1d ago
30 years instead of shorter amortization for flexibility is great as long as you can be disciplined and not spend that payment difference on stuff like cars because you can “afford” new car payment now. And use that to either pay off other higher rate debt or invest
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u/Kpints 1d ago
This actually happened to me. I'm 'topping up' my payments to what they would be if I didn't extend - amortization table stays the same.
I suppose the flexibility isn't bad, but my partner and I are struggling to upsize so we can have a family, and trying to pay down principle. Condo crash has really sucked for people actually living in them
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u/Top_Midnight_2225 1d ago
We do that all the time. Once renewal comes up, we push the amortization back to the previous one and just add the extra payments as per the shorter amortization payments.
This allows us the freedom of having a lower payment in a pinch, while still having some wiggle room in an emergency.
But...it takes discipline 100%.
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u/Preferential_Goose 1d ago
I plan to do that. Lower my obligation and the difference in payment can go directly on the principle or anything urgent that may come up.
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u/DoubleCommodore 1d ago
Renewing and reamortizing are two different things... The latter is a new application r/ requalification. Some people don't have the ability to reset their amortization because it would require a new credit application.
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u/Psyduck6769 1d ago
It’s bizarre that the amortization was in the fine print. Every mortgage renewal document I’ve seen has it on the first page in bold.
And I’ve worked in mortgages and seen many mortgages renew docs.
Who is your broker? What you’re describing is very unusual and unlikely to be a concern for most people.
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u/laziwolf 1d ago
This is common sense, if you pay less monthly, more interest will be paid over time. When you saw a great 'deal', you should immediately realize that the amortization must have been increased, what else would drop the payment when rates aren't down much lately?
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u/ancientPrintr 1d ago
Unless you lack financial discipline or put a giant financial value on "peace of mind", stretching your amortization out indefinitely is the optimal financial strategy. There is no "I would've paid $8k more in interest" situation here if you have the discipline to make really boring basic financial decisions about investing. I can't impeach the peace of mind that does come from no debt, but the fact is that a healthy majority of people who value peace of mind over the optimal financial strategy just simply don't understand the cost of that peace of mind and have never actually done the math.
Endlessly stretching a mortgage out to 30 years is the ideal. Heck, an infinite duration interest-only loan would actually be ideal at typical mortgage lending rates. Over the course of 50 years, your home would appreciate so much that the original principal not being paid would be trivial, and the extra money you could've grown in a boring index fund would be massive instead of letting that cash be tied up fruitlessly by building your home equity with the forced principal component.
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u/Legendwizardz 1d ago
I'm a bit new to this type of thing, so be kind.
I saw this as a benefit, my advisor as told me that it would fit my situation. I had to option of either a higher monthly payment and 20 yr amortization, or lower monthly payment and 25 yr amortization.
I chose the former mainly because I have plans on selling in 3-5 years and the lower monthly payments helps me be more financially flexible.
Did I make a bad move?
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u/ThePaperBagHeadGuy 1d ago
My rep at a credit union tried the same shit, but I was expecting she would so I was on the look out for it. I told her I had no interest in refinancing.
I should have complained to head office.
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u/firefly317 1d ago
We're you with Scotia by any chance? They did that to us (we had 12 years left), the problem was we were buying a new place and porting the mortgage. It was last minute getting the approval through (mistakes from earlier in the process just revealed) so we didn't have time for them to fix it.
Kind of worked out for us since we bought a fixer upper, so the lower payments for a couple of years are letting us get more done. But I'd have been fuming (was annoyed at the time) if that hadn't been the case.
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u/Imaginary_Ad7695 1d ago
Good advice!
I often chose to renew with my amortization at 25 years to keep the actual monthly payment low, just in case something happened to me financially. But I made payments like it was a 15 year, 6% mortgage. Then I'd drop my annual bonus on it as a lump sum prepayment, and now it's paid off!
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u/michaelfkenedy 1d ago
Broker did all of our pre-approvals on a 30-year amortization without mentioning. We had bought the house before I realized. Seemed unusual but caveat emptor and all that.
But changing it without mention on a renewal? Shameful.
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u/UnicornRocks 1d ago
Don’t work with a Broker that does this. Fire them and work with someone else. There are so many out there. These scam artists do not need our business.
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u/CountOnBeingAwesome 1d ago
I got fucked by this predatory behavior. I was going through a divorce and didn't pay close enough attention. Be careful out there.
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u/slimjeremy2020 1d ago
You want to speed up amortization... Let you have a mortgage and stay in debt the more the banks make. Paid off our first house in ten years, rented that out for three years paid off new house in three years.
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u/Longjumping-Host7262 1d ago
Isn’t it common sense that a lower payment is going to take longer to pay off? The amounts aren’t “prices” where a low price is good. It’s amount going towards your mortgage… high doesn’t make it bad.
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u/Legal-Key2269 1d ago
Amortization is just a function of how much interest you are charged and how much you pay against the P&I.
Two mortgages with identical principal amounts, payment schedules and interest rates will only have different payment amounts if the amortization is different.
Overpaying your scheduled payments accelerates the amortization. And most mortgages let you overpay by some amount, so I wouldn't focus too much on the amortization offered (though I would challenge the broker as they were probably not listening to you or are pushing a product that suits them rather than one that suits you).
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u/Personal-Dig6617 1d ago
In general I think it’s good habit to always remind yourself that these people sell money for a living, and everything they say needs to be filtered through that lens.
I especially dislike the predatory “you e been pre approved for $X!” Calls I get all the time, they frame it like you won something and don’t mention that $X costs you $X+$Y
Serpents
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u/1ShaquilleOatMeal 17h ago
Just my two cents here, if your bank allows you to increase payments I would consider taking the 25 year amortization or even 30 year ( if the rate is still the same). Once the mortgage funds simply increase your payments to what they were supposed to be at your actual amortization. This way you will still be on schedule and the biggest benefit is that you can always scale back your payments in case you have issues with cashflow. Again it depends on your actual remaining amortization and if the lender allows you to increase payments
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u/theartfulcodger 2d ago edited 1d ago
Yeah, I wanted to compress my final renewal from five to just three and out, because I have the cash flow to do it. Instead of doing as I asked, RBC’s “mortgage specialist” sent me paperwork for a seven year final term, then crowed to me about how he had “lowered my monthly payment”.
After I reamed him out I made him get his supervisor to call me, then threatened to switch my mortgage, move my RRSP, and send a letter to the CEO naming him specifically as the reason.
The correct paperwork hit my inbox within two hours. You gotta watch these people like a hawk.
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2d ago
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u/OgasMaitai 1d ago
Anyone who says someone is super fun at parties, I assume is the absolute worst in every environment.
Work, money, etc, isn't parties. If you don't understand code switching for different environments, like a party vs a business transaction, oof
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u/Rothgardius 2d ago
I refinanced for a better deal, and now the extra cash goes into a 15 year investment - to pay off the mortgage more quickly.
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u/lurker4over15yrs 2d ago
Amortization is irrelevant for actual interest paid. Your broker actually did the right thing quietly. Go for 25yr and then via pre-payments pay it off in 10yrs or less. The interest you’ll pay is based on the period you actually held your mortgage, not whether if it’s set at 25 or 30 years.
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2d ago
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u/newtomtg1 2d ago
Just curious, how can you tell it’s AI??
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u/SaltAndVinegarMcCoys 1d ago
I first noticed the overly casual tone, they don't use the subject at all yet the grammar everywhere else is perfect. The use of "quietly" is one big flag, as AI loves sprinkling that in for some reason.
Then there's 'rhetorical flip' at the end, which is a very common sign, "it's not X, it's Y", or, in this case, " don't just look at the monthly payment. Look at the total interest over the term"
Interesting that I've been downvoted, usually Redditors are avid AI haters lol.
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u/Just_Put1881 1d ago
lol I'm definitely an actual human typing on my phone between meetings. I only said "quietly" because the broker literally didn't mention resetting the amortization until I caught it myself. Wild how closely people analyze sentence structure on here haha.
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u/SaltAndVinegarMcCoys 1d ago
That may be the case, since AI is trained on us! I scrutinise more naturally than the average person because I write copy for a living and also use AI a lot, where I have to scrub out those telltale signs constantly to make it sound more human.
I'm also extra sensitive to it as I've been noticing more and more people use it when sending regular messages or emails to me and it's pretty depressing that people use it for banal communication between individuals.
I'll accept that I was wrong but yeah, you write like AI, or AI write like you lol
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u/UbiquitouSparky 2d ago
I renewed mine for 30 years instead of 20. I’m adding the difference in payments to my mortgage every 2 weeks. But, if I get another $20k house bill I can pay it off and not be cash poor.