The range of choices in mortgage maturities that are now available with certain lenders permits us to create very individualized mortgage strategies for each of our clients - hypotheque.
Since spring 2006, it became possible to repay a mortgage over a period of 30 and even 35 years.
Is taking out a longer amortized home loan the right thing for you?
You definitely don't want to pay off your mortgage (hypothèque) more slowly, and end up paying more interest on your mortgage. Most people still prefer the regular 15 to 25 year paydown schedule.
But in some, it can be a good idea:
many people are just about certain of receiving a large increase in their future income, but they just don't have it yet. For example:
- a spouse is in school, but will be completing studies soon
- a salary is based, according to a collective bargaining agreement, on years of service
- the income of a self employed individual has not yet appeared in his tax returns
• Flexibility in expenditures – some people (commission workers, seasonal workers, self employed) have incomes that vary each year and they would like to have the minimum payment possible in order to manage their outlay of funds during the periods of reduced income. - prêt hypothécaire
• Rental Income – A property earns lease income which is tax deductible. The landlords prefer to have more revenue each month to reinvest than to accumulate equity in the property; this equity is not easily accessible.
How to shorten the real amortization period of a mortgage - hypotheque.
Is it possible to shorten the amortization term of a 25 or 35 year mortgage or even a 15 year mortgage?
Yes, you can.
We share many strategies with our clients that permit them to pay off their home loans much more quickly than the original amortization date.
Just because you commit to a mortgage note of 25 or 35 years with a lender does not mean that you have to pay it over 35 years. It is not the piece of paper that decides the actual repayment schedule, but rather the payments that you make over the life of the loan.
Early payments shorten the amortization period.
All lenders permit you to make certain pre-payments payments. This gives you the right to remit amounts over the minimum amount due. There are two types of pre-payments:
1. Increase your monthly payment. Most lenders permit you to increase your monthly payment by 20% per year without penalty.
2. Payment on the principal. In most cases, you can repay an additional 20% of the principal portion of your home loan every year.
Each time you make an additional payment, your amortization reduces. You can create your own accelerated payment program.
Here is an ideal example:
A mortagee is getting his Master's degree in 9 months and he knows he will be eligible for an increase in his salary as an instructor once he has attained this. He decides that it is better to buy a house now rather than wait. If he secures a $200,000, 25 year home loan, his monthly payment will be $1,209.17 at 5.4%. On a 35 year mortgage, his payment is $1,035.18 a month; he takes the 35 year mortgage. (hypotheque)
In two years, his salary has increased by 20%, so he uses some of this increase to pay an additional $200 per month against his mortgage. Now paying $1,253.18 per month (assuming no other changes) he can finish paying off his home in 22.4 years from the date he started the additional payments, or 24.4 years in total (not 35).
Extended periods of amortization are not for every borrower, but are marvelous mortgage (hypotheque) tools that we can use to create a mortgage strategy just for your needs.