Amortization
If you have planned on getting a significant loan or mortgage, you have likely heard the term ‘ Amortization.’
However, have you ever sat down to look at precisely what Amortization is, how it is calculated, and how different amortization schedules can change the route of your investments?
If not, then let me show you how picking the proper amortization schedule for your loans can help set you up for long-term success as an investor.
But first, if you would like to discuss your options and see how each schedule would impact your individual financial situation, click the link below for a free strategy call today with our mortgage team at LendCity.
What is Amortization?
These payments are traditionally monthly; however, certain mortgages and loans sometimes come with different payment plans, such as biweekly or weekly payments.
However, when discussing Amortization, schedules are typically discussed regarding how many years they are set for. For example, the average person in Canada gets a mortgage with a 25-year amortization schedule.
How is Amortization Calculated?
To calculate the Amortization, several factors must be considered, including the loan amount, interest rate, the loan term, the loan repayment period, and any additional fees (if any are present). After each factor has been determined, the total cost is divided up over the lifetime of the mortgage.
Fixed-Rate Mortgages
With a fixed-rate mortgage, over your entire amortization period, you will typically have the exact same regular mortgage payment for the whole lifetime of the mortgage. This payment is divided between the principal and interest portion.
Variable-Rate Mortgages
With a variable-rate mortgage, the initial payment is set similarly to how you would set up a fixed-rate mortgage’s amortization schedule. However, as interest rates change periodically, your monthly payment may change in relationship with the rising and falling interest rates.
If rates lower, you can pay more towards your principal loan and pay down the mortgage faster than your initial estimated amortization schedule. At the same time, if rates rise, it may take longer to pay down your mortgage, or your payments may increase to accommodate the new rate while maintaining the same schedule.
Choosing the Best Amortization Schedule for Your Needs
How long of an amortization schedule you will get for your mortgage will vary on various factors. If you are looking to build equity quickly and can afford a high monthly payment, it may be worth your time to get a 5 or 10-year mortgage. Meanwhile, you may choose something more extended if you need to keep your monthly payments low or plan to hold a property for a long time.
Sometimes, specific mortgage rates and products are only available with particular amortization schedules, so sometimes, you may take a longer mortgage to ensure you get the best rate.
If You Are Ready to Invest
If you are ready to invest, don’t walk blindly into the first mortgage you qualify for at the bank. Instead, let us help you find a product with the best amortization schedule, interest rates, and terms for your needs.
To get started today, all you need to do is click the link below for a free strategy call with our mortgage team at LendCity.