Amortization refers to a loan repayment schedule over a set period of time. In the mortgage industry, amortization is the amount of time you’ll need to pay off your mortgage in equal payments over the duration of the loan.
Amortization in a mortgage refers to the amount of time you’ll need to pay off your mortgage in equal payments over the duration of the loan. The required or desired amortization period will influence the interest rate offered for your mortgage. At nesto, the longest amortization you can get is 30 years.
Question 1: Is amortization a good thing?
Amortization can be a good thing because you will be sure that at the end of your last term, you will be owning the property. If you stick with your payment schedule over the amortization period, you’ll be guaranteed to be mortgage free at the end of the last term. On the other hand, a longer amortization will slow down the mortgage repayment process because the longer your amortization period is, the lower your payments will be.
Question 2: What is the best amortization type?
The best amortization type will depend on your goals and needs. If you want to be home free as soon as possible, you should opt for a shorter amortization period, accelerated payment or use your prepayment privilege options. With this type of amortization, your monthly payments will be higher but you will own your house sooner and you will generally save on interest. If you prefer to have lower monthly payments, you should consider a longer amortization period.