Mortgage Amortization Period
Was talking to my mortgage broker to determine the max mortgage that I can receive and he was telling me about mortgages with 30 and 35 year amortization periods. What are the cons of going with these mortgages other than the obvious?
Are rates typically higher? Is there more insurance fees? I will be putting down minimum 25% so I'm expecting to avoid CHMC fees.
Thanks!
Are rates typically higher? Is there more insurance fees? I will be putting down minimum 25% so I'm expecting to avoid CHMC fees.
Thanks!
Amortization is the length in time required to have the entire mortgage amount paid off.
This is usually 25 years (600 months).
I've never heard of 30 or 35 years.
This is usually 25 years (600 months).
I've never heard of 30 or 35 years.
The longer the amortization ... the smaller the payment amount ...
do not forget that the Term and Interest rate are the other variables in the calculation.
Typically ... would be 25 year amort ... and people would take terms up-to 5 years fixed.
Interest rate is fixed for the term ... unless if you go with a variable rate mortgage ... in which the rate fluctuates with the prime rate.
do not forget that the Term and Interest rate are the other variables in the calculation.
Typically ... would be 25 year amort ... and people would take terms up-to 5 years fixed.
Interest rate is fixed for the term ... unless if you go with a variable rate mortgage ... in which the rate fluctuates with the prime rate.
30 and 35 year mortgages are fairly new here but have been around in the US for awhile.
They work the same as 10, 15, 20, 25 etc.
Interest rates are based on the 'term' of the mortgage, which is independent of the amortization period. Terms are typically 6 months to 5 or even 7 years, at which point you renegotiate the terms.
The main benefit is lower monthly payments. The main drawback is that you'll pay more in interest because you'll be paying longer and paying less on the principal each year. Not that the interest rate is higher, it's just that the 'balance' you are paying interest is on will be larger. Of course you may be able to make some lump-sum payments on the principal if you make that part of the terms.
One other thing to consider from a planning point of view. If you have to move from 25 years to 35 years in order to buy your home then you aren't going to have much wiggle room left to buy nice things for your home, or when it's time to replace your car etc.
They work the same as 10, 15, 20, 25 etc.
Interest rates are based on the 'term' of the mortgage, which is independent of the amortization period. Terms are typically 6 months to 5 or even 7 years, at which point you renegotiate the terms.
The main benefit is lower monthly payments. The main drawback is that you'll pay more in interest because you'll be paying longer and paying less on the principal each year. Not that the interest rate is higher, it's just that the 'balance' you are paying interest is on will be larger. Of course you may be able to make some lump-sum payments on the principal if you make that part of the terms.
One other thing to consider from a planning point of view. If you have to move from 25 years to 35 years in order to buy your home then you aren't going to have much wiggle room left to buy nice things for your home, or when it's time to replace your car etc.
I always thought 25 year amortization periods were the longest which is why when the mortgage broker told me about 30 and 35 year periods I wanted to make sure the only thing that changed was the payment amounts and the total interest.
This will be for an investment property that I will be renting out and selling after 2 or 3 years, so the with a smaller monthly payment I can break even with the rent or possibly gain a little profit and the extra interest can be expensed.
This will be for an investment property that I will be renting out and selling after 2 or 3 years, so the with a smaller monthly payment I can break even with the rent or possibly gain a little profit and the extra interest can be expensed.
Quote:
Originally Posted by stevethewheel 30 and 35 year mortgages are fairly new here but have been around in the US for awhile. They work the same as 10, 15, 20, 25 etc. Interest rates are based on the 'term' of the mortgage, which is independent of the amortization period. Terms are typically 6 months to 5 or even 7 years, at which point you renegotiate the terms. The main benefit is lower monthly payments. The main drawback is that you'll pay more in interest because you'll be paying longer and paying less on the principal each year. Not that the interest rate is higher, it's just that the 'balance' you are paying interest is on will be larger. Of course you may be able to make some lump-sum payments on the principal if you make that part of the terms. One other thing to consider from a planning point of view. If you have to move from 25 years to 35 years in order to buy your home then you aren't going to have much wiggle room left to buy nice things for your home, or when it's time to replace your car etc. |
We don't have that much of a risk here that's why 25 years has always been the max.
Quote:
Originally Posted by StarvinStudent I always thought 25 year amortization periods were the longest which is why when the mortgage broker told me about 30 and 35 year periods I wanted to make sure the only thing that changed was the payment amounts and the total interest. |
Check out this blog:
http://toreal.blogs.com/toronto/2006...year_mort.html
It's especially common here in Vancouver since housing prices have sky rocketed.
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