The long term mortgage strategy - hypothèque

You may not think it is such a good idea to take out a longer mortgage than is traditional, such as 25 or 35 years. These options are now available and they can help you and your mortgage broker to find a mortgage strategy that is just right for you. Since spring of 2006, there has been a new type of mortgage (hypotheque) that allows a much longer repayment periods of 25, 30 or 35 years.

Is it good to take out a longer amortized mortgage?

The purpose is surely not to take a longer time to pay down your home, or to pay more mortgage interest on your mortgage - prêt hypothécaire. In fact, most people will choose a 15 to 25 year amortization payoff.

But there are situations where extending your mortgage in this way works:

• Anticipated income: Let’s say you know you will be receiving an increase in your income in the coming years, even if you haven’t received it yet, this may be an option. Perhaps
-one of the couple is in school, and will finish soon
-your salary is based upon certain collective bargaining increases and you will be earning more in a year or two.
-You are not able to prove adequate income to qualify for a shorter term mortgage because you are self employed, but your verifiable income will be increasing soon.
•You want payment flexibility. - There are those who receive a weekly paycheck that does not stay the same from week to week, but one that changes. In this case, they might want to keep their mortgage payments low for the periods when there is not a great deal of income. Examples of this would be people who are paid by commission, seasonal workers or the self employed. (hypothèque)
• If you have a rental income property, you may prefer to increase your income each month by keeping the mortgage payments lower because of tax implications and reinvest the increased income rather than build equity in the property.

How to shorten the actual amortization period of a mortgage - prêt hypothécaire.

Is it possible to shorten the amortization term of a 25 or 35 year mortgage or even a 15 year mortgage?

Of course.

We reveal many strategies with our clients that allow them to pay off their home loans much more quickly than the original amortization date.
Just because you sign a mortgage note of 25 or 35 years with a lending institution does not mean that you have to pay it over 35 years. It is not the document that decides the actual repayment schedule, but rather the payments that you make over the entire term of the loan.

Early payments shorten the amortization period.

All lenders permit you to make certain pre-payments payments. This will give you the right to remit amounts over the minimum payment due. There are two types of pre-payments:

1. Increase your monthly payment. Most lenders allow you to increase your monthly payment by 20% per year without penalty.
2. Payment on the principal. In most cases, you can pay an additional 20% of the principal portion of your home loan each year.

Each time you make an added payment, your amortization lessens. You can create your own accelerated payment program.

Here is an ideal example:

A mortagee is getting his Master’s degree in 9 months and he knows he will be eligible for an increase in his salary as an instructor once he has accomplished this. He estimates that it is better to buy a house now rather than wait. If he secures a $200,000, 25 year mortgage, his monthly payment will be $1,209.17 at 5.4%. On a 35 year mortgage, his payment is $1,035.18 a month; he takes the 35 year mortgage. (prêt hypothécaire)
In two years, his salary has grown by 20%, so he uses some of his increase to pay an additional $200 per month against his mortgage. Now paying $1,253.18 per month (assuming no other changes) he can finish paying off his home in 22.4 years from the date he started the additional payments, or 24.4 years in total (not 35).

So what do we learn from these examples?
Taking out an extended amortization home loan is not always the right solution, but for certain people in certain circumstances, it is ideal - hypothèque

Gregory is an Accredited Mortgage Professional (AMP). To get more information on Mortgage Loans - pret hypothecaire, visit: Hypotheque - Mortgage Intelligence