What are my Amortization Options?

General Nicole Perri 8 Mar

Your mortgage amortization period is the number of years it will take you to pay off your mortgage. Depending on your choice, the amortization period will affect how quickly you become mortgage-free. It will also determine how much interest you pay over the lifetime of your mortgage. A longer lifetime equals more interest, whereas a shorter lifetime equals less interest but also bigger payments.

Amortization Benchmarks

Let’s start by looking at the mortgage industry benchmark amortization period. 25 years is the standard that is used by most lenders when it comes to discussing mortgage products. It is also typically the basis for standard mortgage calculators. While this is the standard, it is not the only option when it comes to your mortgage amortization. Mortgage amortizations can be as short as 5 years and as long as 50 years!

Benefits of a Shorter Amortization

Opting for a shorter amortization period will result in paying less interest overall during the life of your mortgage. Choosing this amortization schedule means you will also become mortgage-free faster and have access to your home equity sooner! However, if you pay off your mortgage over a shorter time frame, you will have higher monthly payments. A shorter amortization may not work for you if your income is irregular, you are at the maximum end of your monthly budget or this is your first home. Since this leaves you with more cash flow tied up in your monthly mortgage payments.

Benefits of a Longer Amortization

When it comes to choosing a longer amortization period, there are still advantages. The first is that you have smaller monthly mortgage payments, which can make home ownership less daunting for first-time buyers. It can also free up additional monthly cash flow for other bills. Secondly, choosing a longer amortization can often get you into your dream home sooner. With your payments happening over a longer period, you may qualify for a higher value mortgage than a shorter amortization.

Let’s Chat!

We would be happy to help pick your amortization that best suits your unique requirements and ensure you have adequate cash flow. It’s important to mention that you are not stuck with the amortization you choose at the time you get your mortgage. You can shorten or lengthen your amortization, as well as consider making extra payments on your mortgage , at a later date.

Ideally, you are re-evaluating your mortgage at renewal time (every 3, 5, or 10 years depending on your mortgage). It’s a great time to review your amortization, payment schedules and make changes that are no longer working for you.

If you have any questions, don’t hesitate to reach out to Nicole today!