What is amortization?
Simply put, it is the length of time it takes to repay your mortgage loan. In Canada, if you have 20% or less down, then the maximum amortization you can do is 30 years. If you are putting 20% or more down, then you have the option to go as high as 40 years amortization. When looking at an amortization schedule, you’ll see that your fixed payment has a portion that goes to interest and a portion that goes to principal. Of course the name of the game is, pay less interest and I affectively reduce the long term amortization on my mortgage. I’m going to leave with 3 good tips on how you can do that. #1) is consider making your monthly payments instead into accelerated bi-weekly, or weekly payments. That in and of itself, will really reduce your amortization. The Second one is, consider setting your payment higher than what maybe you could be having, based on your qualification. A couple of ways you can do that is if you are choosing a variable product, consider making your payment as if it were a 5 year fixed mortgage, OR if you are coming out of a renewal or a refinance, where you’re already accustom to making a higher payment, with a lower interest rate-keep the higher payment-this will really really knock down a lot of years off your amortization. And finally, at the Mortgage Centre City-Wide, our Inflation Hedge Mortgage Strategy, is an incredible tool, where we make sure that as interest rates are changing and rising in the marketplace, we continually optimize and change your payments accordingly, which of course adds more principal pay down to your mortgage. Thanks for Watching.