Longer amortizations can lower your mortgage payments.
Can you get 30 years (or more) to pay off your mortgage? Here's when you can, can't (or maybe shouldn't) get an extended amortization.
Amortization is the length of time it will take you to pay off your mortgage entirely. The standard amortization for a mortgage is typically 25 years. Taking more time to pay off your mortgage is called an 'extended' amortization.
You may be able to extend your amortization up to 30 years (or more), depending on your details and the lender you choose.
Extended amortizations of up to 30 years are offered under certain circumstances to assist affordability and access to homeownership by spreading your mortgage amount out over more years to lower your monthly payments.
An extended amortization is a good option if you need to free up some monthly cash flow and are willing to trade that benefit for more mortgage payments and more interest paid over that time extension.
Getting an extended amortization of up to 30 years may be possible if you have enough down payment for a conventional mortgage (20% or more for a Loan-to-Value of 80% or less).
If you have an insured mortgage (less than 20% down), your only option is a 25-year amortization. You may have the option later to extend if you pay enough down on your principal and refinance, or sell your home and buy another one as a conventional mortgage.
An extended amortization is also subject to financial or credit approval by the lender. Talk to one of our expert True North Mortgage brokers to help sort out your details.
A 30-year amortization may be an allowable option when:
If you have a mortgage with at least 80% LTV, you may be able to find an alternative lender who offers an extended amortization beyond 30 years (even 40 years or more isn't unheard of). You'll likely pay a higher rate for the privilege, but the (extended) extension may lower payments enough to allow the budget room you need.
If you want (or need) to have lower monthly mortgage payments to free up immediate cash flow, then a longer amortization will help you achieve that affordability. However, it will cost you more interest.
Let's take a look at a simple illustration:
Home purchase price of $425,000 with a 20% down payment, 5-year term at 4.59% (our current low 5-year fixed-rate available)
Your mortgage situation is unique. Our highly-trained brokers can outline all the details to help you make a clearer decision based on your financial needs and goals.
There are many ways to shorten your amortization to save more cash, despite the length you signed on for when taking out your mortgage.
It depends on how flexible your mortgage is for allowable pre-payment privileges, or if you come into a large influx of funds, any pre-payment penalties that would factor in.
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