The
Amortization is the length of time it takes to pay off a
Mortgage, assuming that the interest rate and payment amount do not change, all payments are made on time and no additional payments are made.
In Canada typically the longest amortization period is 25 years, although some institutions may allow a longer period. It is to your advantage, however, to choose the shortest amortization period that you can afford. This will save you thousands of dollars in interest in the long run. The following table shows how much interest is paid (over the entire amortization period) on a $150,000 mortgage, assuming a constant annual interest rate of 6.45 per cent.
Example - Amortization vs. interest paid
|
Mortgage amount |
Amortization |
Monthly payment |
Interest paid |
|
$150,000 |
25 years |
$1,000 |
$150,060 |
|
$150,000 |
20 years |
$1,105 |
$115,550 |
|
$150,000 |
15 years |
$1,295 |
$83,200 |
|
$150,000 |
10 years |
$1,690 |
$53,150 |
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