There are typically numerous physical and mental stresses associated with home buying. It also doesn't help that the process comes with its very own foreign language. While your mortgage broker can help de-mystify these terms, it does help to have a dictionary on what some of these terms mean.
We'll start with the words "Amortization" and "Term". Both refer to periods of time in the life of your mortgage, however note that there is a difference. The "amortization" of your mortgage is the length of time that would be required to reduce your mortgage loan to zero, based on regular payments at a specified interest rate. The amortization period is usually 15, 20 or even 25 years, although it can be any number of years or part-years. For example, you choose to make monthly payments of $950 for your $130,000 mortgage at 5.5%. So in this case, your amortization period will be just under 18 years.
Or you want to tell your broker that you'd like to be mortgage-free in just 10 years then that would be an amortization length of 10 years. With the same interest rate, your $130,000 mortgage will come out to be about $1,407 per month. That's a harder plan, but the benefit is that you would save thousands of dollars in interest. Remember about your amortization length as you arrange your mortgage. You can make it fairly long if you want to be comfortable with the monthly payments, although the shorter you can make it, the more you'll save in paying for your home by subtracting from the interest..
The "term" is the duration of your mortgage agreement and it will normally be shorter. You will have different options but this will be a very specific length of time. For example, a 6-month mortgage is a very short-term mortgage while a 10-year mortgage will be one of the longest terms. Usually the longer the term, the higher the rate of interest will be. This is due to the higher stage of uncertainty in the economic outlook.
Later on when your mortgage term expires, you will need to either pay off the rest of the balance of the mortgage principal, or negotiate for a new Ontario mortgage at whichever rates that are available at that present time. - 29904
We'll start with the words "Amortization" and "Term". Both refer to periods of time in the life of your mortgage, however note that there is a difference. The "amortization" of your mortgage is the length of time that would be required to reduce your mortgage loan to zero, based on regular payments at a specified interest rate. The amortization period is usually 15, 20 or even 25 years, although it can be any number of years or part-years. For example, you choose to make monthly payments of $950 for your $130,000 mortgage at 5.5%. So in this case, your amortization period will be just under 18 years.
Or you want to tell your broker that you'd like to be mortgage-free in just 10 years then that would be an amortization length of 10 years. With the same interest rate, your $130,000 mortgage will come out to be about $1,407 per month. That's a harder plan, but the benefit is that you would save thousands of dollars in interest. Remember about your amortization length as you arrange your mortgage. You can make it fairly long if you want to be comfortable with the monthly payments, although the shorter you can make it, the more you'll save in paying for your home by subtracting from the interest..
The "term" is the duration of your mortgage agreement and it will normally be shorter. You will have different options but this will be a very specific length of time. For example, a 6-month mortgage is a very short-term mortgage while a 10-year mortgage will be one of the longest terms. Usually the longer the term, the higher the rate of interest will be. This is due to the higher stage of uncertainty in the economic outlook.
Later on when your mortgage term expires, you will need to either pay off the rest of the balance of the mortgage principal, or negotiate for a new Ontario mortgage at whichever rates that are available at that present time. - 29904
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