Your amortization period is the number of years you will need to pay off your mortgage. The length of your amortization period can affect how much interest you pay over the life of your mortgage.
Historically, the standard amortization period has been 25 years. However, shorter and longer time frames may be available depending on the amount of your down payment.
A shorter amortization can save you money as you pay less in interest over the life of your mortgage. Your regular mortgage payment amount would be higher as you are paying off your balance in less time. However, you may build the equity in your home faster and be mortgage free sooner.
A longer amortization period requires lower monthly payments. However, you will pay more interest over the life of the mortgage and it may take longer to build the equity in your home.
Note: If you choose an amortization period over 25 years, you must have a down payment of at least 20%.
See the the chart below. It shows the impact of two different amortization periods on a mortgage payment and total interest costs. Total interest costs increase significantly if the amortization period exceeds 25 years.
|Details||25 Year||30 Year|
|Monthly Mortgage Payment (P & I)(5 yr Term @ 4.00%)||$789.04||$713.28|
|Interests Costs for Full Amortization||$86,707.04||$106,779.45|
Choosing the longer 30-year amortization period would reduce your monthly mortgage payment by $75.76. However, you would also pay an additional $20,072.411 in total interest costs.
Let one of our mortgage specialists help determine the amortization period that is right for you.
You Have Flexibility
You do not need to stay with the amortization period you selected when you applied for your mortgage. It makes good financial sense to re-evaluate your amortization every time you renew your mortgage.
We also offer a breadth of mortgage features designed to help you pay down your mortgage and build your home equity faster.