Canadians underestimate mortgage interest costs
CBC News
When asked how much total interest they’ll pay over a 25-year mortgage, only 20% of Canadians polled gave the right answer, says a survey commissioned by Toronto-based TransUnion.
TransUnion, a credit and information management company, commissioned GfK Roper Public Affairs & Media to conduct the survey in late June, when it polled 1,000 Canadian adults across the country.
Those surveyed were told, “Homeowners usually pay off considerably more money than the original value of their mortgage loan because of the rate of interest on that loan. On average, what percentage of the original loan amount do you think a Canadian homeowner with a 25-year mortgage would end up paying?”
Only one-fifth of respondents got the right answer; 151 to 200% of the original loan amount is the mortgage cost amortized over 25 years.
“By the end of a 25-year term, if you a have a traditional fixed-rate mortgage at 6.43%, you’ll actually pay close to $200,000 on top of your $200,000 mortgage, just in interest,” said Tom Reid, director of consumer solutions, TransUnion.ca, in a release put out Wednesday.
Women and men were equal in giving the correct response, as were Canadians who owned their homes versus those who rented.
Of those polled, Canadians with more education answered correctly more often.
In total about 45% of those interviewed underestimated the cost of interest over the mortgage’s lifetime.
There are ways to save on interest costs. For example, on a $200,000 mortgage, at an interest rate of 6.43%, amortized over 25 years, Canadians opting for weekly payments (instead of monthly payments) would save $40,000 in total interest charges over the course of mortgage.
Or take that same monthly mortgage and amortize it over 20 years, which would increase monthly payments by about $150, and slash more than $40,000 in total interest costs.
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