Mortgage Amortization & Renewals – Understanding your Options

Posted by on August 22, 2011

The biggest investment most of us in Oakville, or anywhere else in Canada, make will be a home purchase. There are many strategies you can use to pay your mortgage off sooner and save money on interest.

First, you need to find a mortgage expert to help you sort through your options.  Lee Anne Taylor, of Home Loans Ontario and Dominion Lending says that choosing your amortization period is a major factor in how much interest you will pay over the life of the mortgage. Mortgage agents, like Lee Anne, deal with many lenders including banks, trust and finance companies, credit unions, private lenders, etc. Finding the best rate and terms for their clients – can save thousands of dollars in interest over the mortgage amortization period.

Most people opt for a 25 year amortization period – meaning they will fully pay off their mortgage after 25 years. Most mortgage calculators and payment tables use 25 years as a standard, but longer periods of up to 35 years are available in Canada.  A longer amortization period draws out the length of time you make mortgage payments.  This results in a lower monthly payment- which is important for with cash flow.  However, with the longer amortization period, you will also be paying interest over the longer life of your mortgage.

With a shorter amortization period, your monthly payments will be higher, but you will be paying less interest over the life of the mortgage and be mortgage free sooner.

When you apply for a mortgage, the lender will calculate the maximum monthly payment they are willing to lend you. This amount is based on a formula which calculates how much you can comfortably afford – given your current financial situation. By spreading your payments for principal and interest over a longer period of time, opting for a longer amortization period may mean you could qualify for a higher mortgage amount (or qualify sooner than you thought you could).

Your mortgage broker can show you ways to double up payments make more frequent payments or pay an annual lump sum to reduce your mortgage (and the amount of interest you pay over your mortgage).  You can often switch amortization periods when your mortgage comes up for renewal -especially if your financial situation has changed.

Since your mortgage agent works for you – not the banks – it is wise to have them calculate different payment options and amortization periods so you can choose the right options for your needs.  For more information on Oakville mortgages  and mortgage renewals, contact Lee Anne at (905) 336-8948 for a free mortgage consultation

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