TORONTO, September 25, 2006 — Canada Mortgage and Housing Corporation (CMHC) insured Interest-Only Mortgage, is a new mortgage concept that can help qualified homebuyers lower their monthly mortgage payments and improve their monthly cash-flow flexibility.
The Interest-Only Mortgage gives qualified homebuyers the option of paying interest only for the first five or 10 years of their mortgage. Following the interest-only period, payments will be adjusted to allow for principal and interest payments. Homebuyers must still qualify for a mortgage based on the ability to support monthly principal and interest payments amortized over a period of up to 25 years.
“This new mortgage will appeal to two different groups: qualified first-time buyers and existing homeowners who want to reduce their monthly payment for a period of time,” says Scott McKenzie, Vice President of Residential Mortgages at First National.
For example, the monthly payment for a traditional five-year fixed mortgage of $175,000 at today’s rate (5.30 per cent) is approximately $1,050. With an Interest-Only Mortgage, the payment would be $765. That’s a net difference of $285 per month, or $3,420 per year.
“That extra money can be used to perhaps accommodate RRSP contributions, other investment opportunities, tuition fees or home renovations,” McKenzie added.
Qualified borrowers can get an interest-only mortgage for up to 90 per cent of their home’s purchase price.