Pros and Cons of 25-year and 30-year mortgage amortizations in Canada

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Canadian Mortgage Amortization Options

A mortgage is a significant financial commitment, and choosing the right amortization period can make a big difference in your financial situation.

In Canada, the two most common mortgage amortization periods are 25 years and 30 years.

Here are the pros and cons of each option:

Pros of a 25-year amortization mortgage:

  1. Lower interest costs: With a shorter amortization period, you will pay less interest over the life of your mortgage, which means you can save money in the long run.
  2. Build equity faster: By paying off your mortgage faster, you will build equity in your home more quickly. This can be an advantage if you plan to sell your home in the future or use it as collateral for a loan.
  3. Lower risk: With a shorter amortization period, you will pay off your mortgage faster, which means you will have a lower risk of defaulting on your loan.

Cons of a 25-year amortization mortgage

  1. Higher monthly payments: Because you have a shorter period to pay off your mortgage, your monthly payments will be higher than they would be with a longer amortization period. This can make it more challenging to manage your cash flow.
  2. Less flexibility: With higher monthly payments, you will have less flexibility in your budget. If your financial situation changes, it can be challenging to make your mortgage payments.
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Pros of a 30-year amortization mortgage:

  1. Lower monthly payments: Because you have a longer period to pay off your mortgage, your monthly payments will be lower than they would be with a shorter amortization period. This can make it easier to manage your cash flow.
  2. More flexibility: With lower monthly payments, you will have more flexibility in your budget. If your financial situation changes, you will have more wiggle room to make your mortgage payments.
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Cons of a 30-year amortization mortgage:

  1. Higher interest costs: With a longer amortization period, you will pay more interest over the life of your mortgage, which means you will end up paying more for your home in the long run.
  2. Slower equity build-up: By paying off your mortgage over a longer period, you will build equity in your home more slowly. This can be a disadvantage if you plan to sell your home in the future or use it as collateral for a loan.
  3. Higher risk: With a longer amortization period, you will have a higher risk of defaulting on your loan. This is because you will have a larger outstanding balance on your mortgage for a longer period.

Conclusions and Further Thoughts

In conclusion, the decision between a 25-year and a 30-year amortization mortgage depends on your individual financial situation and your long-term goals.

A shorter amortization period will save you money in interest and help you build equity in your home more quickly, but it will also come with higher monthly payments and less flexibility.

A longer amortization period will give you lower monthly payments and more flexibility, but it will also cost you more in interest and slow down your equity build-up.

Let Huber Mortgage help you make the best decision for you!  Contact HERE.

Sincerely,

Michael

PS – One of my hobbies is blogging about mortgages, debt and government policy.  During the day I’m a MORTGAGE BROKER in Kelowna, BC!

Check out the Huber Mortgage Home Buyers Guide HERE

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