Best Mortgage Amortization for First Home Buyers

Go long or go short — your mortgage amortization period not only affects your day-to-day cash flow, but when and how you sell your home. First time home buyer? Find out how the mortgage amortization term you choose affects your principal and interest obligations, when to go long, and what lenders say about going short.

Quick Read

What is mortgage amortization?

What is a 25-year vs 30-year amortization?

How to decide mortgage amortization periods

Reamortize if your circumstances change

What Mortgage Amortization Is 

Your mortgage amortization is how long it takes to pay off a mortgage in full.

  • Mortgage amortization spreads out loan payments over time.
  • Lenders base your payments on your amortization period. 
  • Your lender pays the interest on your loan first, then puts what’s left of your payment towards the principal (the loan amount you borrowed) and other charges you owe, such as property taxes and mortgage life insurance.
  • Your amortization schedule shows how much of each payment will go to interest vs principal.
  • As your debt (principal) shrinks, the amount of your payment that goes to interest declines. You pay more towards interest at the start of a mortgage loan. 
  • Your lender can give you a mortgage amortization schedule showing your exact repayment amounts for the term of your current mortgage contract. Calculate the cost of paying off a mortgage early
  • Ask income tax preparers about deducting mortgage interest when you rent your home or have a home-based business.

What is Better, a 25- or 30-Year Amortization?

What is a 10-year term with 25-year amortization anyway? The 10-year mortgage term is the length of your current mortgage contract. (Depending on the interest rates you want or can afford, you can pick mortgage terms ranging from months to years, to a maximum of 10 years.) 

If you consistently select a 10-year term with monthly payments, you’ll need to renew your mortgage 2.5 times to pay it off in 25 years, and make 300 monthly payments. 

Compared to what a 10-year term, 30-year amortization means for your monthly, weekly, or biweekly payments, the difference can be significant. Calculate your payments for a 25- vs 30-year mortgage amortization. Do you qualify for a private mortgage

Go Long or Short on Mortgage Amortization

The longer you make mortgage payments, the more interest you pay. 

Longest vs Shortest Mortgage Amortization Periods 

You can shorten a mortgage amortization period to as little as five years, or find a private lender to stretch it out over up to 35 years. Amortization periods for high ratio mortgages from CMHC, Canada Guaranty, or Sagen™, for borrowers with less than 20% down, are limited to 25 years. Tips if you’re a first time home buyer in Ontario. https://www.axesslaw.com/articles/first-time-home-buyers/ 

How to Decide on Mortgage Amortization Periods

Should you go long or short if you’re a first time home buyer? That depends on what you can afford, and how quickly you want to pay off your debt. If you have average income and plan to stay awhile, go long with a 20- to 25-year mortgage amortization. 

Other debts chipping into your housing budget? Put the minimum down and choose the longest term a credit union or lender will allow. Make regular prepayments when you have extra cash, or save for annual lump sum payments to defuse the impact the higher interest costs makes on your repayment schedule. Use the money you save to pay down debts faster or add to a RRSP. You can re-amortize when your finances improve.

Advantages of Shorter Mortgage Amortization

If finances permit, try for a 15-year or less mortgage amortization to maximize the amount you pay down on principal. Use a shorter amortization period as a forced savings plan, or to beat future rate spikes that increase mortgage interest expenses. Compare interest costs long vs short amortizations.

Watch this YouTube video for 6 questions to ask your mortgage lender

How to Re-amortize a Mortgage

How to change the amortization period on your mortgage in Canada:

  1. If your circumstances change for the better or worse, consider changing your mortgage amortization period. Reamortize if you are temporarily laid off or interest rates go up. 
  2. Ask your mortgage lender how increasing or reducing the mortgage amortization period would affect your payments. Live in Ottawa? Defer property taxes to save more. 
  3. Talk to mortgage brokers to see if refinancing through a new lender would save you money.
  4. Look into prepayment penalties, administrative and appraisal charges, and other fees to break your mortgage contract. Your lender charges a mortgage discharge fee to break your contract and register a new fee against the title to your property. More on breaking a mortgage contract. 

Why You Need a Real Estate Lawyer 

When you find the perfect mortgage or amortization period, contact Axess Law. Our flat fee real estate lawyers can close your transaction on time and on budget. Axess Law goes over the fine print in your agreement for purchase and sale and makes recommendations that can protect your legal or financial interests. 

Hire a first time home buyer lawyer. 

Even if you have already signed an agreement of purchase and sale, Axess Law may be able to amend it on your behalf. We arrange agreements that allow seller and buyer to withdraw by mutual consent. More on what to include in your offer to purchase. 

Concerned about terms and conditions you don’t understand? Your real estate lawyer can answer any questions you may have, like can a buyer back out of a purchase agreement in Ontario, or what happens to the deposit when buying a house? 

Whether you’re buying a home, selling, or refinancing your mortgage, our professional legal teams liaise with your bank, credit union, trust company, or private lender to obtain documents you need to finalize your transaction. We discharge existing mortgages, and help you sign new mortgage documents to keep your transaction on time and on budget. First time home buyers, borrow from RRSPs for a downpayment. 

When finding favourable financing doesn’t go the way you hoped, Axess Law negotiates with the seller’s lawyer to give you more time. If negotiations stall altogether or the other party threatens legal action, we refer you to our trusted legal partners for advice. Find first time home buyer incentives in Ontario.  

Axess Law advises on how to add a spouse to house title in Ontario when we file the title documents at your local land titles registry. Your real estate lawyer checks titles for construction liens or financial encumbrances that may prevent you from purchasing a home or transferring a property, and advises you what to do next. What’s spousal consent to sell property? 

Affordable Real Estate Lawyers, Anywhere You Are 

Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario  when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it. 

Virtual Law Services for Less

Axess Law’s virtual real estate lawyers video conference with you anywhere in Ontario. Speak to a lawyer from the privacy of your home or office with our secure, confidential video conferencing software. Our flat fee lawyers show you how, witness your documents online, and email you a signed copy for your records. 

Find a virtual real estate lawyer near you. 

Book Appointments Online or By Phone

Arrange day or evening legal appointments, 7 days a week, with Axess Law’s easy online booking form. You can make virtual real estate lawyer appointments from anywhere in Ontario, with any compatible mobile device. Ask about times convenient for you by dialing our 647-479-0118 lawyer line in Toronto, or calling toll free to 1-877-402-4207. Axess Law has offices near you in Greater Toronto Area and Ottawa, with onsite parking and easy transit access.

Related Articles