There is a growing trend in North America towards a longer mortgage amortization period. With this thinking comes many risks and potential pitfalls.
Just a few years ago the idea a 25 year amortization on your mortgage was the maximum anyone had ever heard of. Now people are talking about 30, 40 and 50 year amortizations. There is a shift in mentality happening all around us. People are investing in property with no intention of ever having there mortgage paid off.
Individuals are looking to future to continue to be bright for Real Estate. Values will continue to rise and they will be able to recover there original equity as the value of there property increases.
However this can become a a concerning trend if we see a sudden increase in interest rates. A 3% interest rate hike could devastate the economies of North America. This would essentially increase the interest on the average mortgage by 2/3's. Increased payments and decreased down payments mean that many of us could find ourselves unable to qualify to renegotiate the existing mortgage on our homes.
