[jsolson]

A perspective from an American:

- Yes, typically we can refinance whenever we like, _but_ it extends the mortgage for a 30 year term, along with additional direct immediate costs (plus human inertia). Unless interest rates were alarmingly high for your last go-round (ehem), you're directly incentivized and indirectly likely to not do so.

- I own properties in Canada (yay Commonwealth!). The notion of a 30-year fixed does not exist. One can get a 25-year amortization, but typically only with a 5-10 year guarantee for a fixed rate.

- As an American, Canadians are insane for buying into this system. Our system is so much more favorable to anyone with good enough credit to be approved for a loan it's literal comedy. Also our standards for approving someone for a loan seem to be lower (that said, I had no credit history in Canada when I started this adventure, so perhaps residents get a better deal).

- As a property investor, I'm happy to control for the cash I sink into my investments in interest versus the returns I get from rental revenue. Combining that with exchange rates and US interest rates versus Canadian, I <3 Canada.

- Fully variable interest mortgages are for suckers (and in that regard, I do have some regrets).

(bias: I <3 Canada regardless -- I'd live in Whistler, BC if circumstances allowed)

[gambiting]

>>but_ it extends the mortgage for a 30 years

How come? Here in UK you just remortgage for the remaining term of your mortgage, if you have 14 years left you just remortgage for 14 years. Is that something that you have to to do in America, or just what most people choose to do?

[tzs]

In the US lenders generally only offer a few options for the lengths of fixed rate mortgages, with 15 and 30 years probably being the most common.

There is generally no prepayment penalty here, so if you want some length that isn't one of the standard ones you can just get a longer one and then pay some extra principle each month to pay it off over the timeframe you wanted.

[blacksmythe]

It is amazing how much less time it takes to pay off a 30 year mortgage if you increase the payments 10%. The first good many years are paying mostly just the interest.

[psunavy03]

No, this poster is not correct. You CAN refinance for another 30-year note, or a 15-year note, or a 10-year note, or whatever the bank will let you refinance for and you're willing to sign up for.

All you're doing is taking out another loan and using that loan to pay off the original loan. So whatever terms you can get from the bank are fair game.

Also, there's nothing stopping you from paying the loan off early.

[D13Fd]

Refinancing has a significant cost though. The various fees and transaction costs add up to $10-20k+ in my experience. Is not at all free, unless the savings from the difference in interest rate exceeds the transaction cost.

[gambiting]

Interesting. Here in UK there are usually literally no costs to remortgaging, we've remortgaged couple years ago and only cost was paying £500 for a solicitor to look throught he paperwork(which we convinced the bank to pay for in the end, so it cost us nothing overall).

[psunavy03]

A refi over here is treated cost-wise exactly like taking out a new mortgage, which you then use to pay off the first mortgage.

[gambiting]

Same here. There are no fees(usually) for taking a new mortgage either. A bank might charge you something for making the transfer, but it's like £50, completely insignificant.

[digitaltrees]

These 30 year terms and favorable terms like no prepayment penalty or balloon payments are a result of government regulations and subsidies that were created after the Great Depression in the 1930s and were designed to 1.) prevent people from losing homes when interest rates increase, 2.) encourage homeownership by making mortgages easier and more rational for buyers.

There are other government regulations and subsidies that encourages and compensates lenders for participating in this market. The government gives access to low interest loans through the federal reserve banking system, created private entities (such as Freddie Mae) that purchase conforming mortgage back securities and requires buyers to pay for loan default insurance until they have a specific amount of equity in the home (which compensates the lender in the event of a foreclosure).

These policies and subsidies are the only reason this market exists and is able to be so highly beneficial for buyers and allow for such a long-term risk taking.

[lukevp]

When you refinance, it’s just a new mortgage. You can do it purely for rate, or you can do a cash out refi (refinance at market rate for your house, pocket the equity you’ve built up as cash, but now your loan is bigger). The loan terms are like a regular mortgage, because they basically are. The originator of the mortgage often sells it on the secondary market.

[gambiting]

Well yes, obviously - it's the same here. I just read what OP said as a requirement that you have to extend your mortgage by another 30 years. Here you just get a now mortgage of any length you want - if you fancy 9 years or 12 or 38 that's fine.

[frumper]

Extending isn't the right word. You're applying for a completely new one, often with a different bank. The common options are 15 year and 30 year terms. The new one pays off the old one and if it's structured you can even get extra cash out, though that may increase your interest rate.

[S201]

In this case you would likely do a 15 year term loan. The previous comment is misleading or incorrect in stating that you have to do a new 30 year loan always when refinancing.

[bonton89]

When I refinanced they let me pick a term of a 27 years, of course it was at the 30 year rate. There is no advantage to doing this versus just automatically overpaying the mortgage every month to tune in the target payoff date.

[psunavy03]

A 15-year loan is a standard term, with rates that are usually different from a 30-year.

[dagw]

As an American, Canadians are insane for buying into this system.

As a European, the US mortgage system combined with very generous tax-deductible interest rules, is probably one of the most generous and property owner friendly system around. As a property (and mortgage) owner myself, I'm very envious of it.

That being said, had I been a renter in the US I would probably be very upset about how much tax payer money is going to support home owners.

[throwaway2037]

    very generous tax-deductible interest rules

There is a lot of economic research around the second order impact of these tax deductions. Do they, in fact, increase the cost of homes? There is _some_ evidence that says yes, so the tax deduction is offset by higher purchase price.

[frumper]

The standard deduction is now taken close to 90% of the time in the US. Most people no longer benefit from the mortgage interest on their taxes.

[psunavy03]

The standard deduction has been significantly increased in the US recently. Mortgage interest is often not worth itemizing unless you're in a high cost of living area or have a big house elsewhere.

[Scoundreller]

> As an American, Canadians are insane for buying into this system.

In theory, there’s nothing wrong with some/tons of uncertainty, as long as people don’t play along and don’t overpay while hoping for the best. Buuuuut people are stupid and do just that.