04:31:00
Longer amortization periods, or shorter ones? Your amortization period's length will affect the total cost of your mortgage. The amortization period refers to the number of years in which you need to pay your mortgage in full. For the past years, the standard amortization period in the banking sector has been 25 years. This is the benchmark utilized by most lenders when discussing mortgage offers. However, you can always choose longer or shorter time frames.
Why would you choose an amortization period that's shorter? For one, a shorter amortization period means that it's possible for you to be free of your mortgage earlier. Also, by agreeing that you will pay off the mortgage within a shorter time period, you are greatly reducing the interest you have to pay over the duration of the mortgage. Another advantage is that you can build your home equity faster with a shorter period of amortization. Equity refers to the difference in the home's market value and any existing mortgage on it. This represents how much money you can affirm as your asset. If you decide to, you can use this equity as security for funding your kids' education, home renovations, succeeding property investments, and many others.
There are, of course, other factors to consider. By reducing the total number of mortgage payments to make, the amount of each regular payment will be increased. If you don't have a regular income or if you're buying your first home and will be burdened with a large mortgage, this may not be the appropriate option.
Having a long amortization period also has advantages. You can move into your dream home faster with a longer period of amortization. Lenders compute the ceiling amount you can afford as regular payment when you first apply for your mortgage. That calculated amount will then be used to compute the total amount they will let you borrow as mortgage. An extended period of amortization lessens the regular principal amount and interest payment by distributing the payments over a longer time period. So you could be permitted to a greater mortgage amount than you expected, or be eligible for your mortgage earlier than you hoped. Whichever way, you get your dream house sooner than you imagine. Many people may choose a longer period of amortization since regular payments can be similar or perhaps even cheaper than paying rent. However, it translates to paying greater interest over the period of the mortgage.
You don't have to stay with whatever period of amortization you originally chose when you applied for the mortgage. You can always shorten the period of amortization and use options like accelerated payment, doing extra payments like Double Up, or a yearly lump sum prepayment of the principal to save on interest costs. Always re-assess your amortization strategy during mortgage renewal. As your career and income gets better, you can increase the amount of each regular payment by up to 10% once a year. These prepayment features can shorten your period of amortization by years, and save money on interest.
Why would you choose an amortization period that's shorter? For one, a shorter amortization period means that it's possible for you to be free of your mortgage earlier. Also, by agreeing that you will pay off the mortgage within a shorter time period, you are greatly reducing the interest you have to pay over the duration of the mortgage. Another advantage is that you can build your home equity faster with a shorter period of amortization. Equity refers to the difference in the home's market value and any existing mortgage on it. This represents how much money you can affirm as your asset. If you decide to, you can use this equity as security for funding your kids' education, home renovations, succeeding property investments, and many others.
There are, of course, other factors to consider. By reducing the total number of mortgage payments to make, the amount of each regular payment will be increased. If you don't have a regular income or if you're buying your first home and will be burdened with a large mortgage, this may not be the appropriate option.
Having a long amortization period also has advantages. You can move into your dream home faster with a longer period of amortization. Lenders compute the ceiling amount you can afford as regular payment when you first apply for your mortgage. That calculated amount will then be used to compute the total amount they will let you borrow as mortgage. An extended period of amortization lessens the regular principal amount and interest payment by distributing the payments over a longer time period. So you could be permitted to a greater mortgage amount than you expected, or be eligible for your mortgage earlier than you hoped. Whichever way, you get your dream house sooner than you imagine. Many people may choose a longer period of amortization since regular payments can be similar or perhaps even cheaper than paying rent. However, it translates to paying greater interest over the period of the mortgage.
You don't have to stay with whatever period of amortization you originally chose when you applied for the mortgage. You can always shorten the period of amortization and use options like accelerated payment, doing extra payments like Double Up, or a yearly lump sum prepayment of the principal to save on interest costs. Always re-assess your amortization strategy during mortgage renewal. As your career and income gets better, you can increase the amount of each regular payment by up to 10% once a year. These prepayment features can shorten your period of amortization by years, and save money on interest.
About the Author:
An amortization schedule, a table detailing each periodic payment on a loan, shows this ratio of principal and interest and demonstrates how a loan's principal amount decreases over time. An amortization schedule can be generated by anconsulting your professional loans officer at your neighborhood bank.
0 comments:
Post a Comment