How interest-only mortgages could provide an unusual savings tool

Now that everyone, including Bank of Canada Governor Stephen Poloz, seems to be seeking ways to make the mortgage market more flexible and responsive to Canadians’ needs, how’s this for a radical idea?Well, that product exists in Canada and it’s called an interest-only mortgage. As the name suggests, borrowers can buy a home or refinance into this mortgage and pay just interest. Unless you make prepayments, the balance never changes.

What are the financial penalties/conditions for making prepayments or paying off the mortgage in full? And don’t think you’ll get a bigger mortgage by paying interest-only. Competitively priced I/O mortgages are subject to the government’s stress test. This limits buying power by making borrowers prove they can afford much higher interest rates – 5.69 per cent or higher, as of this week.By diverting mortgage payments to higher-earning investments, an I/O mortgage can pad your retirement savings.

Loans Loans Latest News, Loans Loans Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Bank of Canada's Poloz says mortgage market should offer more product choicesStephen Poloz is making the recommendations as he monitors three key housing-market stories — the oil-slump-driven slowdown in Alberta and Saskatchewan, the steep drop in resale activity in Toronto…
Source: VancouverSun - 🏆 49. / 61 Read more »

Bank of Canada’s Poloz champions tougher mortgage rules, says housing market set to growPoloz says mortgage system could benefit from imaginative approach, such as encouraging more people to take out longer fixed-rate mortgages
Source: nationalpost - 🏆 10. / 80 Read more »

Posthaste: Mortgage makeovers, trade tensions linger and Trans Mountain lifelineStuff you need to know today
Source: nationalpost - 🏆 10. / 80 Read more »