Notice how when offering as an incentive they disclose how little money you are putting towards principal.
"Remember 95% of your payments in your first year could be interest"
Marketers are creative with numbers! This inspired me to look at the 40 year mortgage more creatively myself.
With a 5% rate and 40 year amortization 14% of your payment goes toward repaying your debt in the first year. Not quit as depressing as the ad would imply. Leave it to me for some positive spin.
How much do you pay off in the first year? $805 for each $100,000 owed as shown below.
The first two charts neglected CMHC fees. From the last post we determined that with a 40 year mortgage and 5% down you need to tack on 3.35% to the loan amount. While the last generation celebrated being mortgage free, we can aspire to "CMHC freedom day". That is the day to celebrate paying off the CMHC premium portion of the balance. This happens on month 46 as illustrated in the chart below.