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I'm guessing regulatory frameworks and a more competitive market in the US. It's surreal to me the rates you can get locked in for 25 years in the US. Seems li

I'm guessing regulatory frameworks and a more competitive market in the US. It's surreal to me the rates you can get locked in for 25 years in the US. Seems like the lender is taking a lot of risk there. When I first got my mortgage in Canada RBC offered me something like ~2% fixed on a 5 year term or ~8% fixed for a 25 year term. I can't imagine what their 25 year term rate is right now.

xuki 4y ago
In the US the banks write the loans and offload them to Fannie and Freddie. It’s essentially a government back stop.
fennecfoxen 4y ago
25? No one does 25. You’re locked in for 30.
- papercrane 4y ago
  You can only do 30 years in Canada if you put 20% down. The agency that underwrite default insurance will only insure up-to 25 year mortgages.
- dghlsakjg 4y ago
  25 is the standard in Canada.
kelnos 4y ago
There's actually minimal risk to the bank; 30-year fixed mortgages are guaranteed by Fannie and Freddie, who are guaranteed by the US government. If a borrower defaults, the US government makes the bank whole again. Banks do pay for the privilege, but it's pretty much always worth it to them.
- SilasX 4y ago
  What are you referring to by banks paying for the privilege? Like an fee they have to pay to be able to offload into Fannie? Or compliance costs? Or something else?
throwawaymaths 4y ago
It's even surrealer to me that my mother got a 30 year mortgage. She's 80. While I think she has an outside chance of living till 110 - she has really good genetics - I doubt the bank knows this... I'm not exactly sure what the plan is (though she is good for the payments so long as she lives).
- gizmo686 4y ago
  Most 30 year mortgages are paid off within 10 years; often using the proceeds of selling the house in question. The bank's plan is that they will sell the mortgage before the paint drys; then they don't care what happens. Regardless, the expectation is that your mother will continue making payments until either she or her estate sell the house, at which point the full balance of the loan will be repayed without any early payment penalty.
- lordnacho 4y ago
  When you die, your estate still owes the money to the bank. The bank is thinking when she passes the estate will sell the house, or she'll end up needing a retirement home and sell. Worst case if she's insolvent they'll take the house, but with a large enough down payment this won't cause a loss for the bank. Nobody thinks an 80yo will live another 30 years btw. Queen Elizabeth is 96 but her chances of writing herself a letter are actually not even half, since annual attrition at that age is something like 20 or 30 percent. Sorry to be a downer, I don't mean to be cynical about your mom, just looking at statistics.
  - throwawaymaths 4y ago
    No worries, you don't seem to be appreciably more cynical about my mom than I am. I did say it's only an outside chance she lives to 110. If I had to bet on it, I'd bet against. The bank is taking a risk though, even if they did get recover with the estate, that's got to be a pain in the ass. I wonder at what point the administrative cost of getting that house resold doesn't make sense.
    - lordnacho 4y ago
cperciva 4y ago
It's 100% regulatory framework. It's effectively illegal in Canada to offer fixed-rate mortgages with terms of over 5 years.

xuki 4y ago

In the US the banks write the loans and offload them to Fannie and Freddie. It’s essentially a government back stop.

fennecfoxen 4y ago

25? No one does 25. You’re locked in for 30.

papercrane 4y ago
You can only do 30 years in Canada if you put 20% down. The agency that underwrite default insurance will only insure up-to 25 year mortgages.
dghlsakjg 4y ago
25 is the standard in Canada.

kelnos 4y ago

There's actually minimal risk to the bank; 30-year fixed mortgages are guaranteed by Fannie and Freddie, who are guaranteed by the US government. If a borrower defaults, the US government makes the bank whole again. Banks do pay for the privilege, but it's pretty much always worth it to them.

SilasX 4y ago
What are you referring to by banks paying for the privilege? Like an fee they have to pay to be able to offload into Fannie? Or compliance costs? Or something else?

throwawaymaths 4y ago

It's even surrealer to me that my mother got a 30 year mortgage. She's 80. While I think she has an outside chance of living till 110 - she has really good genetics - I doubt the bank knows this... I'm not exactly sure what the plan is (though she is good for the payments so long as she lives).

gizmo686 4y ago
Most 30 year mortgages are paid off within 10 years; often using the proceeds of selling the house in question. The bank's plan is that they will sell the mortgage before the paint drys; then they don't care what happens. Regardless, the expectation is that your mother will continue making payments until either she or her estate sell the house, at which point the full balance of the loan will be repayed without any early payment penalty.
lordnacho 4y ago
When you die, your estate still owes the money to the bank. The bank is thinking when she passes the estate will sell the house, or she'll end up needing a retirement home and sell. Worst case if she's insolvent they'll take the house, but with a large enough down payment this won't cause a loss for the bank. Nobody thinks an 80yo will live another 30 years btw. Queen Elizabeth is 96 but her chances of writing herself a letter are actually not even half, since annual attrition at that age is something like 20 or 30 percent. Sorry to be a downer, I don't mean to be cynical about your mom, just looking at statistics.
- throwawaymaths 4y ago
  No worries, you don't seem to be appreciably more cynical about my mom than I am. I did say it's only an outside chance she lives to 110. If I had to bet on it, I'd bet against. The bank is taking a risk though, even if they did get recover with the estate, that's got to be a pain in the ass. I wonder at what point the administrative cost of getting that house resold doesn't make sense.
  - lordnacho 4y ago

cperciva 4y ago

It's 100% regulatory framework. It's effectively illegal in Canada to offer fixed-rate mortgages with terms of over 5 years.