While the most common amortization period is 25 years, shorter and longer periods are available. Choosing the length of your amortization period will depend on a variety of factors that you will want to consider. While choosing a shorter period is tempting in order to pay off your mortgage faster, it might not be the best decision for you.
Mortgage Term vs. Amortization Period
The term of a mortgage is the length of time your mortgage agreement is effective (this span of time depends on your contract with your lender). An amortization period is the complete duration of time it will take you to pay off your mortgage.
This choice is ideal for those who can afford higher monthly payments. While your mortgage payments will be higher, the overall cost will be less due to lower applied interest. Not only will this cost less at the end, but you will be mortgage free much sooner!
Most people opt for a longer period because of the lower monthly payments, however the longer it takes you to pay off your house, the higher the interest.
Although it’s frustrating to know that you are paying more than you would with a shorter amortization period, having this option makes it possible for many people to buy homes that otherwise wouldn’t be able to.
Changing Your Amortization Period
If down the road you want to shorten or elongate your amortization period, be assured that you can! When your mortgage is up for renewal, you have the option to re-evaluate the terms and conditions and make changes that better fit your current situation. It is natural for us that as we progress in our lives, major lifestyle, career, and family changes are bound to happen. Most lenders are aware that sometimes life happens, so they are usually flexible if you decide to rethink your amortization strategy.
If your house is not up for renewal however, and you would like to speed up your mortgage payment process, some lenders allow you to make lump sum payments. Whether you just got a hefty tax return or have received a bonus from work, making those extra payments will definitely contribute to paying off your home quicker.
Here at Mortgage Winners, we can help you decide which amortization strategy is best for you. We will evaluate your current and potential financial situation, and devise a strategic plan designed specifically for you.
If you would like to find out what we can do for you, don’t hesitate to give us a call or shoot us a message!