New home refinancing products, such as interest-only mortgages and mortgages with 35 or 40 year amortizations, are making monthly payments more affordable.

You can take advantage of interest only mortgage if you have a strong history of managing your credit and are looking to reduce your monthly mortgage payments for a period of time.

Here are some of the other advantages of having interest only mortgage:

• Provides you with cash flow during the early years of a mortgage
  
  
• You can take advantage of your prepayment options to make principal payments
  
  
• Free up funds to perhaps accommodate RRSP contributions or other investment opportunities, tuition fees or home renovations.
  

Basically, you can pay interest only for up to first 10 years of your mortgage and then following the interest only period, your monthly payments will be adjusted to allow for principal and interest payments. The new payments will be adjusted to ensure that the mortgage is paid in full within 25 years from the date of the original mortgage.

For example:

Let's say your home value is $250,000.00 dollars and you have at least 10% home equity...

If you selected initial 5 year interest only option then your monthly payments during your initial 5 year period would be $407.82 less than if you had regular principal interest mortgage payments with 25 year amortization assuming 5.25% interest rate.

The following four examples show the difference in monthly payments between a standard 25 year, 30, 35, and even 40 year amortized mortgage along side the monthly payment of an interest only mortgage (based on the 5/20 interest only program). All have the same rate (5.25%), and all outside factors (CMHC fees, taxes, etc) were held out for straight comparison reasons.