$60k – what Canadians pay in mortgage interest

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By Wayne Karl
It’s a scary question many homeowners are afraid to answer: how much will your mortgage interest total over the lifetime of your mortgage? Well, wonder no more – a recent poll from BMO Bank of Montreal has the answer: $60,000.
But that’s the average for Canada. Some will pay more, some less.

• While the average amount Canadians expect to pay in mortgage interest is $57,938, the figure rises to its highest in Canada for residents in BC at $95,891. Homeowners in Atlantic Canada expect to pay the least, at $35,454
• Canadians expect an increase in interest rates over the next five years (60 per cent), with 48 per cent expecting a small increase and 12 per cent a large increase
• Most Canadian mortgage holders (67 per cent) currently hold a fixed-rate mortgage, sheltering them against any potential upswings.

“It’s quite telling of the extended low-rate environment that a sizeable percentage of respondents [40 per cent] do not expect interest rates to go up in the next five years,” says Sal Guatieri, senior economist, BMO Capital Markets. “Hopefully, many have not been lulled into thinking that rates will never go up, as they could be tempted into taking on too much debt.”
It’s not surprising that British Columbians are paying the most mortgage interest, as house prices in that province are the highest in the country, he says. The average was $623,000 in April, compared with $437,000 nationwide and $456,000 in Ontario.
“In any interest rate environment, it’s important that Canadians stress-test their mortgage against a higher rate to ensure they can afford it over the long term,” says Martin Nel, vice-president of personal lending and investment products, BMO Bank of Montreal.
AVERAGE AGE OF MORTGAGE FREEDOM INCHES HIGHER:
On average, Canadians expect to become mortgage-free by the age of 59 – up from 58 in the last two years. One-third (31 per cent) expect to still be making mortgage payments on their 65th birthday.

3 tips to become mortgage-free faster:

Think carefully about fixed versus variable: While variable-rate mortgages have been a winning strategy over the long term, fixed-rate mortgages (currently near historic lows) come with the peace of mind of being insulated against rate increases.
Stress-test your mortgage: Gauging the stability of your mortgage by stress testing it against a higher interest rate can help establish a plan to ensure long-term affordability.
 Understand every step of the home-buying journey: The BMO Home Buyers Guide provides advice and information to guide buyers through the process of financing, choosing and buying a new home. Visit bmo.com for more information.
Original Source: NEW HOME GUIDE July 10 – 24, 2015