Elan Weintraub Quoted on Mortgage Broker News –BoC touts long-term mortgages to open MBS market

https://www.mortgagebrokernews.ca/news/boc-touts-longterm-mortgages-to-open-mbs-market-257119.aspx

Lenders are chary about propagating the advantages of long-term mortgages because they don’t want to be exposed to the market for that long, but Sammut says that the MBS market would free capital for long-term mortgage loans, which banks would then price aggressively.

But is a long-term mortgage really the best thing for consumers? Elan Weintraub doesn’t think so.

“Historically, seven- and 10-year terms have higher interest rates, and for many people their income goes up over time, so it’s better to have a lower rate and lower payment without tying yourself up,” said the broker and director of Mortgage Outlet. “What I recommend to my clients is taking a five-year term and increasing their payments as if the interest rate was the same as on a 10-year term. If the five-year rate is 3.95% and the 10-year rate is 4.95%, that money goes directly to their principal.”

It’s also unlikely borrowers’ lives will remain static for enough to warrant a decade-long commitment.

“Things change so quickly nowadays that it’s difficult for a person to predict they’d be in the same mortgage for 10 years and not get married, have no job change, no change of city, not refinance to pay off debt, not refinance to buy an investment, not refinance to buy a cottage,” said Weintraub. “The probably of that is pretty low. The benefit of five years is you can start over and look at all your options again.”