Bank of Montreal : BMO Celebrates New Year with its Low Rate, 25-Year Amortization Mortgage

TORONTO, ONTARIO--(Marketwire - Jan. 3, 2012) - BMO Bank of Montreal is encouraging potential homebuyers to celebrate the New Year by choosing a mortgage with a 25-year amortization as a way to save thousands of dollars on interest costs and help manage debt levels. BMO offers a 5-year, low-rate, 25-year amortization mortgage at 3.49 per cent.

Canadians have set a record for household debt. According to the Bank of Canada, the debt burden has exceeded levels in the United States and the United Kingdom. The ratio of debt to personal disposable income is now more than 150 per cent. Bank of Canada Governor Mark Carney has issued a warning to Canadians to be cautious with their spending.

"Canadians need to continually examine ways to reduce overall housing costs," said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal. "BMO has been a leader developing products, such as the low-rate mortgage with a maximum 25-year amortization, that we believe are directly relevant to today's environment and specifically designed to help Canadian consumers manage their debt. In September, BMO urged Canadians to choose a 25-year amortization as a way to significantly reduce the amount of interest paid over the life of the mortgage."

Ms. Archdekin added, "It is important for homeowners or potential buyers to be prudent and stress-test their mortgage against a higher interest rate to ensure they can afford what they signed up for. Total housing expenses should not consume more than one-third of total household income."

BMO Bank of Montreal's popular five-year fixed low rate mortgage is available to all Canadian residents at a posted rate of 3.49 per cent.

BMO offers the following tips for Canadians to help them reduce mortgage debt and become mortgage free faster:

Consider a shorter amortization:
	•	The shorter the life of the mortgage, the less you pay in interest.
	•	Choosing a 25 year amortization can help you become mortgage free faster and ultimately put more savings towards long term goals, such as retirement.
Make sure you can afford your home, both now and in the future:
	•	Stress test your financial budget using a mortgage payment based on a higher interest rate. If your rate rises even 1 percentage point from 5 per cent to 6 per cent, you will need an additional $146 per month on a $250,000 mortgage amortized over 25 years.
	•	Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.
Think about the future:
	•	View your home as an investment. Consider its location and accessibility, and whether or not renovations may be required down the road.
	•	Pay down short term debt before taking on a major financial commitment such as buying your first home or upgrading to a larger home.
Make a larger down payment:
	•	If you can provide a bigger down payment, it's a significant way of helping you pay less interest over the life of your mortgage.
	•	With a down payment of at least 20 per cent, you avoid paying mortgage default insurance.
Make pre-payments when you can:
	•	Pay weekly or bi-weekly instead of monthly.
	•	Increase your mortgage payment (principal and interest).
Think carefully about fixed vs. variable:
	•	While variable rate mortgages have been a winning strategy over the long term, fixed rate mortgages (currently at historic lows) provide the peace of mind of insulating you against rate increases and the certainty of knowing how much of your mortgage you will have paid down at the end of your term.

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