As housing reform continues to be part of the Obama administration’s agenda, differences between the mortgage market in the United States and that of other countries have come to light. For instance, how do domestic mortgage products differ from those offered in Canada, a country considered the most comparable to the Unites States?
Here are three critical differences between the home lending market here and in our closest neighbor to the north.
30-year mortgages? Never heard of them While the 30-year, fixed-rate mortgage has become a staple in the U.S., Canada doesn’t offer anything remotely similar. The longest term for a home loan in the North Country is five years, with the amount amortized over a 25-year period. Canadian banks also offer fixed-rate mortgages for two-year, three-year, and four-year terms.
This means Canadians can never count on having a particular loan interest rate last more than five years. At the end of the loan’s life span, borrowers can refinance, but prepaying a loan early to take advantage of a drop in rates can cost mortgage customers dearly, as prepayment fees are quite hefty.