|
| mortgage amount |
amortization | monthly payment |
interest paid |
|---|---|---|---|
| 100,000 100,000 100,000 100,000 100,000 |
15 years 20 years 25 years 30 years 35 years |
893.25 769.31 700.42 658.60 631.86 |
60,784.80 84,634.64 110,122.72 137,099.74 165,386.56 |
You can also reduce your amortization (and therefore the amount of interest you pay) by doing any of the following:
- increasing the frequency of your payments
- increasing the amount of your payments
- paying additional amounts on your payment dates
- making lump sum payments
- selecting a shorter amortization at renewal time
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TERM
The amortization of a mortgage is made up of smaller time periods called 'terms'. A term can be anywhere from 3 months to 25 years. The term is the period of time that you will pay a set interest rate. At the end of the term, you will renew your mortgage for a new term at the prevailing rates of interest.
Generally speaking, the longer the term, the higher the interest rate will be. For example, a 3 year term could be at 6.60%, a 5 year term at 6.75%, and a 10 year term at 7.05%. You are guaranteed that your payments will not change for the length of the term. Let's use our $100,000 mortgage as an example again: (assuming a 25 year amortization)
| mortgage amount |
term | interest rate |
monthly payment |
|---|---|---|---|
| 100,000 100,000 100,000 |
3 year 5 year 10 year |
6.60% 6.75% 7.05% |
675.90 685.05 703.51 |
As you can see, in this example it is just over $25 per month more to guarantee the interest rate for an extra 7 years! No one can predict interest rates in the future, and many people prefer the security of longer terms. Discuss which is the best term for your circumstances with your mortgage broker.
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