Equitable Bank announced this week the forthcoming launch of our 40-year amortization product. Catering to the diverse needs of our customers, we’re bringing back extended amortization to help homeowners achieve their property dreams.

Partnering for Innovation

Equitable Bank has teamed up with a third-party lender to present a novel 40-year amortization mortgage product to the market.

Special Announcement at a Special Event

The exclusive announcement was made by Canada’s seventh-largest bank, Equitable, at the National Mortgage Conference in Toronto.

Purpose Behind the Extension

The move to push the amortization period beyond the usual 25 or 30 years aims to decrease monthly payment obligations. This strategy is designed to make both home ownership and property investment more feasible in light of the prevailing economic and affordability obstacles.

Structural Insights

Equitable’s collaboration with a third-party lender ensures they remain clear of credit or default risks as these loans will be off their balance sheet. In this arrangement, Equitable plays the role of both originator and service provider, overseeing underwriting, closure, and servicing throughout the loan’s duration.

Diving Deeper: What’s in the Product?

• Scope of Application:
  • The mortgage product is versatile, serving both regular owner-occupied acquisitions and refinances, as well as catering to rental properties and investor portfolios.
• Geographic Reach:
  • Initially launching in British Columbia, Alberta, and Ontario, there are plans to expand based on its performance and market needs.
• Targeted Markets:
  • The focus will be on regions with a high demand and where the product offers maximum advantages to clients. Whether this product will be offered in Alberta has yet to be announced.
• Rollout Information:
  • Mortgage professionals can anticipate product details this week. We will be sure to provide more detail as it become available.
• Pricing Expectations:
  • While the exact figures aren’t disclosed yet, anticipated rates hover around the 9% mark. This is attributed to it being an uninsured alternative lending product with a stretched amortization and potentially elevated risks.
• Meeting Market Needs:
  • This product’s introduction is a strategic response to affordability issues intensified by soaring prices and the escalating cost of living. It’s designed to offer financial relief to those aiming for debt consolidation via refinancing and those hoping to buy amidst tough economic conditions.

A Brief History of Extended Amortizations in Canada

Extended amortization periods have had an intriguing journey in the Canadian mortgage landscape. Here’s a brief look back:

• Early 2000s Boom: 40-year mortgage amortizations were first introduced in Canada in 2006. However, due to concerns about the potential risks to the housing market and increasing household debt levels, the Canadian government, through the Canada Mortgage and Housing Corporation (CMHC), began tightening mortgage rules.
• Regulatory Changes: By 2008, the maximum amortization period for government-insured mortgages was reduced to 35 years and later, in 2012, it was further reduced to 25 years. It’s important to note that while these changes affected government-insured mortgages, uninsured mortgages (those with at least a 20% down payment) continued to offer amortization up to 30 years with most major financial institutions.
• Benefits of Extended Amortization: While the move to curtail long amortization periods was rooted in ensuring market stability, it’s worth noting the benefits of extended amortization. It provides borrowers with smaller monthly payments, making homeownership more accessible for many. However, it’s essential to understand that longer amortizations can result in higher interest costs over the life of the loan.