Mortgage to have 40-year amortization
Offering will not be insured

Wells Fargo & Co. is launching a new mortgage product with a 40-year amortization period – the first of its kind for Canadians. The offering will not be insured, however, suggesting the rate could be higher than typical mortgages.
Longer-term amortizations mean monthly payments are lower, giving younger people, or those with poor credit histories a way to purchase a house that otherwise they couldn't afford. But it also means people can end up paying thousands of dollars more in interest, and can be faced with payments long after they retire.

"People who can't afford a house at 25 years maybe shouldn't be jumping in at 40 years," said Benjamin Tal, senior economist at CIBC World Markets. "They're basically shifting the risk, but they're also carrying longer mortgages and are more vulnerable to economic shocks."

Taking a mortgage worth $300,000, an interest rate of 6.5% and a 25-year term, the monthly payment is $2,009.48, while the total interest paid over the entire term is $302,914.

If the rate and mortgage value are kept the same and the amortization period is 40 years, the monthly payment falls to $1,737.96. But the total interest paid jumps to $534,413.

For years, the longest amortization period available to Canadians was 25 years.
But in March, the Canada Mortgage and Housing Corporation said it would insure 30-year terms, and Genworth Financial Canada said it would insure 35-year terms.

When a loan isn't insured, such as the Wells Fargo one will be offering, the lender usually charges a default insurance premium, which is factored into the rate. The company already offers a similar product in the United States.