Understanding Mortgage Amortization: Short vs Long Term

Choosing the right mortgage amortization period is a crucial decision that can impact the amount of interest you pay over the life of your mortgage. Although the typical amortization period in the lending industry is 25 years, you can select a shorter or longer time frame up to 35 years.

Opting for a shorter amortization period can help you become mortgage-free sooner, build equity in your home faster, and reduce the interest you pay over the life of your mortgage. However, shorter amortization periods mean higher regular payments, which may not be the best option for those with irregular incomes or large mortgages.

On the other hand, choosing a longer amortization period can help you qualify for a higher mortgage amount or get you into your dream home sooner, as the regular mortgage payments may be lower or comparable to rent. However, you’ll pay more interest over the life of your mortgage.

Remember, you don’t have to stick to your original amortization period throughout the life of your mortgage. You can choose to shorten it and save on interest costs by making extra payments or an annual lump-sum principal pre-payment. As you advance in your career and earn a larger salary, you can also choose to accelerate your payment options or increase the frequency of your regular payments.

Consult with your mortgage professional to determine which amortization period suits your unique needs and financial situation. Re-evaluate your strategy every time your mortgage comes up for renewal, and take advantage of features that can save you money and reduce your mortgage period.