| The top 2 variables affecting your mortgage: | | | | as quickly as housing costs in much of Canada or the |
| 1) The Amortization Period | | | | past 20 years you can now amortize a mortgage |
| 2) Interest Rates | | | | debt over up to 40 years. This will normally require |
| Amortization Period: Full time period until the mortgage | | | | additional mortgage insurance however. |
| debt matures (commonly 25 years, and now up to 40 | | | | Other things that need to be considered when |
| years) | | | | negotiating a mortgage: closed term vs open term, |
| Increasing the amortization period lowers the monthly | | | | legal fees, property surveys, moving costs, and |
| payment amount while increasing the total payout for | | | | unforeseen costs. |
| the mortgage as less of your monthly payment is | | | | Closed term means you can not pay the mortgage |
| attributed to the principle debt and instead is applied to | | | | back without penalty over the term while open term |
| the interest. Decreasing the amortization period would | | | | means you are able to pay the mortgage back |
| have the opposite effect: higher monthly payments, | | | | early--normally you will pay a higher rate for this option. |
| decreasing the total payout on the mortgage as more | | | | So how do I lower my payments? |
| of the payment is applied to the principal debt and less | | | | 1) Get a lower rate: consider a variable |
| to interest payments. | | | | mortgage--interest rates tend to be lower. Also, |
| Interest Rates: Whether a variable rate or a fixed rate. | | | | consider a closed term--interest rates also tend to be |
| Generally, the interest rate tied to the term increases | | | | lower this way. |
| with the length of the term--a normal yield curve (risk | | | | 2) Change the amortization period: how is this done? |
| tends to increase with time); however, at this point in | | | | Consider changing your payment frequency. It is |
| time the yield curve is very flat and inverts slightly at | | | | surprising how much faster a mortgage is payed off |
| the 4 year horizon. This is significant because normally | | | | when your payments are made weekly as opposed |
| as the term increases, so does the monthly mortgage | | | | to monthly or semi-monthly. You can keep the same |
| payment and total mortgage payout; as a result of the | | | | total payment for the month but divide it up into 4 |
| inverted curve, locking in a 5 year term will afford a | | | | weekly payments. |
| mortgagor a lower rate than locking in at with a 2, 3, or | | | | To make your payments lower you could also |
| 4 year term producing lower monthly payments and a | | | | increase the amortization period; however, this will |
| lower payout. | | | | mean a larger total payout in the end. |
| The difference between the Term of the mortgage | | | | Here are some useful links for estimating what size of |
| and the duration or amortization period of the | | | | mortgage you can afford and how changing a few |
| mortgage: | | | | options will effect your payments: |
| Term: this refers to the time period negotiated by the | | | | Canada Mortgage -Great Calculators for estimating |
| mortgagor and mortgagee and the underlying contract | | | | what you can afford get the link here. |
| negotiated. Usually this will be 5 years or less and will | | | | Don't forget that buying a home is usually the biggest |
| include details such as interest rates--fixed or variable, | | | | investment a person makes in their life so make sure |
| and at what rate; also included are any options such | | | | you get the most from your mortgage. Owning Real |
| as early repayment without penalties. | | | | Estate tends to be a good hedge against inflation; |
| Amortization period or duration: this refers to the entire | | | | however, investing in the stock market on average will |
| length of the mortgage. Commonly this is 25 years; | | | | yield a much greater return so do diversify. |
| however, due to the fact that wages have not risen | | | | |