Mortgage question concerning amortization and payments

[canadian_hustla]

Hey guys. I need your help.

I just got my 6 month mortgage statement and it looks like my principal payments are the same as the interest paid - concerning!. Albeit this is a stupid question, it is bothering me so here it goes:


If someone were to have a mortgage 34 year amortization, and had the payments increased so that they were on the same schedule as payments with a 25 year amortization

is this = to

a mortgage with a 25 year amortization?.

Would there be a difference in the amounts outstanding, etc? Assume all other variables cet par.

Thank you

[lilmira]

The amount of your payment would depend on the rate, principle balance and year term.

If your mortgage is fixed, you can't increase your payment until your term is finished. If it is open, then you can increase your payment anytime.

At the beginning when your principle balance is big, of course you would be paying more interest.

[canadian_hustla]

Originally posted by lilmira
The amount of your payment would depend on the rate, principle balance and year term.

If your mortgage is fixed, you can't increase your payment until your term is finished. If it is open, then you can increase your payment anytime.

At the beginning when your principle balance is big, of course you would be paying more interest.

Rate, balance and term are the same for both cases.

Payment can be increased by putting lump sum monies down on a monthly basis (up to 20% of the original disbursement amount w/o occuring penalties)

I just ran a simulation using

http://www.mackenziefinancial.com/en/calculators/MortgLoanAmortScheduler/mortgloanscheduler.jsp
and it is the same.

I am confused.

[lilmira]

So if you are allowed to make bigger payment then you would be able to pay off the balance early.

I just punched in some numbers for my mortgage. If I was to increase my payment by 20%, I will pay off the balance about 9 years earlier.

[Heff]

About the worst way to pay off a mortgage is to sit back and only make the scheduled payments once per month.

You can shave off years on a traditional mortgage by making bi-monthly, bi-weekly or weekly payments.

If you have the option to pay extra, either on a monthly basis or on a once/year basis, it is highly recommended that you do so as much as your budget will comfortably allow.

My wife and I switched from an accelerated 25 year mortgage with a 21.3 year pay-off schedule (bi-monthly payments) to a HELOC with a 9 year pay off schedule (if we didn't leverage unused balance toward RRSP's, Investments or other uses).

[ExtraSlow]

It's normal for the first couple years of your mortgage that you are pretty much only paying the interest.
If you are concerned, go ahead and put down a couple extra payments. Lump sum early payments go against the principal amount 100% since you pay the interest on your regular payments.

[scortracer]

I think its roughly first 5 years go pretty much straight to interest so it's really nothing new

[lilmira]

Just multiply your principle balance by the rate, that's how much interest you are paying right now.

Say for a 500K house with 25% down. The principle balance is 375K. 375K x 5.25%/12 = 1641 ouch

[willyC]

http://www.canadamortgage.com/calculators/amortization.cgi?CFID=937305&CFTOKEN=54696149

Check out that link

Who the hell gets a 34 year amorz.??? Do you live in the usa??


BMO Was the bank that allowed me to dump the MOST on to my princ. each month. So I went with them.

[canuckcarguy]

Originally posted by canadian_hustla

If someone were to have a mortgage 34 year amortization, and had the payments increased so that they were on the same schedule as payments with a 25 year amortization

is this = to

a mortgage with a 25 year amortization?.

Would there be a difference in the amounts outstanding, etc? Assume all other variables cet par.

Thank you

the simple answer is yes - if you increase your payments, you lower the amortization. Run your mortgage balance on a mortgage calculator using a 25 year amortization, increase your payments to that amount, and you've got a 25 year mortgage. Nice, actually, because if you go through tough times you can lower the payments again. If you can afford it, go with a weekly or bi-weekly accelerated payment schedule - this saves you a bunch of money, mostly because you will essentially make 13 monthly payments instead of 12 every year (ie, if you're paying weekly, there will be four months where you have 5 payments instead of 4).

BUT, if you're concerned about your debt levels, don't forget to pay your higher-interest debts first. It sucks to have a huge mortgage, but the interest is generally lower than your other debts will be...

[wjjeeper]

maximize your lump payments annually.
I've done this and have totally paid off my mortgage in 3yrs as of Jan 4, 2008.

[canadian_hustla]

Originally posted by willyC
http://www.canadamortgage.com/calculators/amortization.cgi?CFID=937305&CFTOKEN=54696149

Check out that link

Who the hell gets a 34 year amorz.??? Do you live in the usa??


BMO Was the bank that allowed me to dump the MOST on to my princ. each month. So I went with them.

CIBC fucked me over with my default insurance (genworth certificate). I specifically told them I wanted a 25 year amortization, and somehow I ended up with a 34 year certificate. Rather than pay the genworth fees again, I decided to live with it and increase my payments.



Originally posted by canuckcarguy


the simple answer is yes - if you increase your payments, you lower the amortization. Run your mortgage balance on a mortgage calculator using a 25 year amortization, increase your payments to that amount, and you've got a 25 year mortgage. Nice, actually, because if you go through tough times you can lower the payments again. If you can afford it, go with a weekly or bi-weekly accelerated payment schedule - this saves you a bunch of money, mostly because you will essentially make 13 monthly payments instead of 12 every year (ie, if you're paying weekly, there will be four months where you have 5 payments instead of 4).

BUT, if you're concerned about your debt levels, don't forget to pay your higher-interest debts first. It sucks to have a huge mortgage, but the interest is generally lower than your other debts will be...

Great advice. :thumbsup: Thank you very much for that.


Originally posted by wjjeeper
maximize your lump payments annually.
I've done this and have totally paid off my mortgage in 3yrs as of Jan 4, 2008.

THis is something that I will have to do too. It is something llike 20% of the approved balance with out incurring a penalty.