Choosing an amortization that's right for you.
The amortization period on a mortgage is the total length of time it will take to pay off the mortgage.
Longer Amortization Periods
A longer amortization period can lower mortgage payments. However, the longer the amortization, the more interest is paid to the lender - and this can negatively affect your ability to save for retirement.
How to Reduce Your Total Interest Costs Regardless of the Amortization
- Increase the frequency of payments. Making accelerated biweekly payments rather than monthly payments will save you interest.
- Know and use the prepayment privileges on the mortgage. On most mortgages you can prepay a certain amount each year, without penalty. Making prepayments as often as possible helps to lower the principal balance outstanding and saves interest.
- At renewal time, shop around. Make sure you still have the right mortgage for your needs. Be sure to consider the interest rate, term, prepayment privileges and other options.
*Source Financial Consumer Agency of Canada