Five ways to shorten your amortization period
For many–if not most individuals–being mortgage-free is the dream. But if you’ve picked a 25-year or 30-year amortization period, that doesn’t mean you have to wait that long to pay it all off. Over time, there are a couple ways to shorten your amortization period to help you get to a retirement space at a faster rate.
- Offer a larger down payment: Although it’s important not to completely tap into all your savings, offering up a larger down payment means you’ll be borrowing less of a mortgage making it easier to pay it off, while also saving you thousands in interest.
- Make bi-weekly payments: If your lender can offer you an accelerated bi-weekly payment option, you’ll make one extra payment a year which can help shorten your amortization period.
- Leave your payment the same if you renew your term at a lower rate: If you happen to renew your mortgage at the end of the term with a lower rate, you could definitely celebrate a lower monthly mortgage payment–or you could keep your payments the same, to get mortgage-free sooner.
- Make a lump sum payment: Depending on your mortgage, you may also have the ability to offer up a lump sum either before the end of your term, at the end of your term, throughout your term, or on certain dates throughout your contract. It’s important to read through your mortgage contract terms to understand what you’re able to do.
Should you choose a longer or shorter amortization period?
The answer depends on your financial situation and budget. With a shorter amortization period, you will be making larger monthly mortgage payments, but you will save on interest. On the flip side, you can take a longer amortization period so your monthly mortgage payments are lower.
Can you extend the mortgage amortization period if necessary?
If for whatever reason you might want to extend your amortization period–in an effort to maybe lower your monthly mortgage payments–you can. However it’s important to note that doing this will be treated as a new application and you’ll have to qualify for a mortgage all over again.
But if you ever have any questions about amortization or finding the right option for you, feel free to connect with one of Pine’s mortgage advisors. They’re happy to help guide you through the homeownership journey.