News Releases

• Households with children are more likely than those without children to consider a shorter amortization (70 per cent versus 48 per cent)
• New data also reveals differences between men and women on choosing a shorter amortization
• BMO Economics expects Bank of Canada rate to increase in the summer
• BMO currently offers an industry-leading five-year fixed low rate mortgage with a maximum 25-year amortization at 3.69 per cent

TORONTO, February 8, 2011 – BMO Bank of Montreal has released the results of a survey showing households with children are more likely than those without children to consider a shorter amortization (70 per cent versus 48 per cent). The results were released on the heels of a recent decision by the federal government to reduce the maximum amortization period to 30 years from 35 for new government-backed insured mortgages, effective March 18th, 2011.

“These results clearly indicate that Canadians are open to the idea of a shorter amortization, which not only helps to pay off your mortgage faster, but also saves you money long-term,” said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal. “For example, on a $250,000 mortgage at a 6 per cent interest rate, moving from a 30 year to a 25 year amortization can save upwards of $55,000 in interest, which can be put directly towards your retirement.”

The BMO study, conducted by Leger Marketing, also revealed:

• More than half of Canadians would consider a shorter mortgage amortization, with those aged 35-44 the most likely to buy in (77 per cent)
• Men are more likely than women to consider a shorter amortization (62 per cent versus 50 per cent).

According to BMO Economics, the Bank of Canada is expected to start increasing its overnight rates in the summer, moving from 1 per cent to 2 per cent by year end. BMO suggests Canadians stress-test their mortgage in advance to make sure any potential increase in interest rates are manageable.

BMO offers the following tips for Canadians to help them become mortgage free faster:

Consider a shorter amortization:

• The shorter the life of the mortgage, the less you pay in interest.
• Become mortgage free faster and begin saving more for retirement.

Make sure you can afford what you signed up for:

• Stress-test your budget using a mortgage payment based on a higher rate.
• Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

Make a larger down payment:

• If you can provide a bigger down payment, it's a significant way of helping you pay less interest over the life of your mortgage.
• With a down payment of at least 20 per cent, you avoid paying mortgage default insurance.

Make pre-payments when you can:

• Pay weekly or bi-weekly instead of monthly.
• Increase your mortgage payment (principal and interest).

Think carefully about fixed vs. variable:

• While variable rate mortgages have been a winning strategy over the long term, fixed rate mortgages (currently at historic lows) provide the peace of mind of insulating you against rate increases and the certainty of knowing how much of your mortgage you will have paid down at the end of your term.

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For media enquiries:

Matt Duffin, Toronto, matthew.duffin@bmo.com, 416-867-3996
Sarah Bensadoun, Montreal, sarah.bensadoun@bmo.com, (514) 877-8224
Laurie Grant, Vancouver, laurie.grant@bmo.com, (604) 665-7596