Debt everlasting

The median age of a newbie house-buyer in the GTA is the same as in America these days. Forty. Yes, some gray hairs. Love handles. A playlist with Weezer and 50 Cent on it. Toyota RAV4. Mature, but not yet marinated.

With a standard 25-year mortgage and no pre-payments, it means a paid-off house and full equity by age 65. That can be pushed to seventy, with a less-popular 30-year amortization. Longer ams mean slightly lower monthly payments, but more interest clocked by the time the loan is paid off. (By the way, two-thirds of Canadians never make extra home loan payments.)

Last year the rules changed, so now first-time buyers or anyone purchasing a new-build house can get the long, three-decade amortization, even with a minimal 5% downpayment.

Some people have suggested we return to the 40-year loan that Stephen Harper let fly just as the real estate market was losing its mind. That ended badly. Especially when combined with 0%-down, CMHC-insured loans which boosted demand and set prices on fire.

Will our loan landscape change again if the Americans go forward with plans for half-century-long mortgages?

It looks like the orange guy is serious about this…

Yes, he posted that. And the top mortgage regulator in the States (the guy who accused Fed governor Lisa Cook, Senator Adam Shiff and NY prosecutor Letitia James of mortgage fraud – all Trumpian targets) is calling the move, “a complete game changer”. His department, he says, is working on the 50-year loan, which would require Congressional approval.

Would half-century loans really change things? Should we have mortgages like that here, so the average new buyer can look forward to being loan-free & frisky at age 90?

So far Canadians are not flocking to long amortizations, it seems. Bankers report low demand for thirty-year loans, and new-build sales have continued to plunge even as those long mortgages become available to buy freshly-constructed condos and singles.

No wonder. Long ams are a really bad idea. Don’t even think about it.

First, payments are marginally lower with extended amortizations, but the amount of interest surges. For example, Americans are being shown that on a $400,000 borrowing (enough in Kits to finance a port-a-potty, but on a decent street) the monthly would decrease by about $250, but the total loan interest repaid would jump from $378,000 to $816,000. Ouch.

Second, long loans usually cost more. The interest rate charged for a borrowing of that length would be higher to reflect the risk involved in loaning capital for what amounts to most of a lifetime.

Third, equity grows more slowly the longer the amortization. That’s because interest charges are front-end-loaded on any amortized mortgage. Borrowers see most of their monthly payments disappearing in financing charges in the early years while the last set of payments come right off the debt. Meaningful equity gains do not come until late in the game.

The big fail of long mortgages – pumped by Harper decades ago and Trump now – is that they’re designed to increase demand. By making monthly payments cheaper these loans encourage people to take the ownership plunge who might otherwise be unable to buy. That increases competition for houses. And up go prices. It’s the classic mistake politicians make, over and again.

So, buyers might pay less monthly for more costly loans while facing massive long-term interest charges and taking years longer to build up equity, which would make selling and trading-up later tougher and more expensive.

Maybe Trump should stick to blowing up fishing boats.

About the picture: “The unlikeliest of friends….maybe, but Zoey (left) and Lola (right), who only meet once a year for a 3 week camping/fishing trip, always seem to pick up right where they left off…just like their humans,” writes Robin, from Vancouver Island. “Love your free informative, candid blog..never miss a day.”

To be in touch ir send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2025/11/12/debt-everlasting/