Buying your first home can be a daunting process including figuring out the right mortgage and options for you. One part of this is knowing about what Amortization to select. Having a low Amortization is important to many people because this means you can be mortgage free in a faster period of time. Here let’s talk about what Amortization really is and what it really means, the options available and how do you choose the right one for you?
Definition of Amortization: The time over which all regular payments would pay off the mortgage in full. The number of payments used to calculate the actual mortgage payment. This determines the principal and interest portion of each payment. The interest portion is higher to start with and slowly decreases over time, although the payment (on a fixed term) remains the same.
Options: Amortizations can range from less than 5 years to as much as 35 to 40 years. This is why you must learn as much as possible about Amortizations so that you don’t end with something that is not right for you.
However, your options will depend on the following:
- Less than 20% down payment the maximum amortization is 25 years (as per default insurer guidelines)
- More than 20% down payment then up to 35 years but depends on the lender and you qualifying
- Some lenders do not offer longer amortizations beyond 25 years
- Some lenders have a minimum amortization they offer
So how do you select the right one for you?
- Firstly, determine which amortization you actually qualify for, and then
- Adjust your amortization up or down so that the monthly payment is within your personal budget
- Calculate your Amortization: http://www.amortization-calc.com
The shorter the amortization, the less interest you will pay: http://yourmortgagedoctor.com/frequently-asked…rtgage-questions/