Why should you take out a 25, 30 or 25 year mortgage - prêt hypothécaire

Maybe you don’t think it is such a good idea to take out a longer mortgage than is traditional, such as 25 or 35 years. These options are now available and they can help you and your mortgage broker to find a mortgage strategy that is the one for you. Since spring of 2006, there has been a new type of mortgage (hypothèque) that allows a much longer amortization periods of 25, 30 or 35 years.

You may feel skeptical about taking out a longer amortized home loan - prêt hypothécaire. It may not be the solution for everyone.

The idea is not to pay off your mortgage as slowly as possible, and therefore raise your interest payments on the mortgage, but to arrange your payments to your best advantage. In most cases, people prefer a 15 to 20 year schedule.

But in some, it can be a good idea:

•Upcoming income
many people are just about certain of receiving a significant increase in their future income, but they just haven’t received it yet. For example:
- a spouse is in school, but will be completing studies soon
- a salary is based, according to a collective bargaining agreement, on years of service
- the income of a self employed person has not yet showed up in his tax returns
•You want payment flexibility. - There are those who receive a weekly paycheck that does not stay the same each week, but one that fluctuates. In this case, they might want to keep their mortgage payments low for the periods when there is not a great deal of income. Examples of this would be people who work on commission, seasonal workers or the self employed. (prêt hypothecaire)
• If you have a rental income property, you might want to increase your income each month by keeping the mortgage payments down because of tax reasons and reinvest the increased income instead of building equity in the property.

Even if you have chosen a longer term mortgage, you can end up paying it off over a shorter term - prêt hypothécaire. You may prefer not to have a 25 or 35 year mortgage (or even a 15 year mortgage). We can design a strategy for you that will let you to take advantage of the longer terms when you need them and then pay them off when you want to. You do not have to believe that you are stuck with a 25 or 35 year loan just because you signed a mortgage note for that period. That note does not determine the actual term of the loan, the amount of payments that you make against the loan is what determines it.

You can make early payments and determine your own amortization schedule.
You see, lenders will allow you to pre-pay a certain amount of mortgage payments. This in turn will allow you to increase the total amount you are paying on your mortgage, at the rate you want. This can happen in either of two ways:

1.Make a larger mortgage payment each month. Most lenders will allow you to increase the amount you pay against your mortgage by 20% per year without any penalties for doing so.
2.Pay additional funds on the principal.
Most lenders will let you designate an additional payment as “additional principal” to pay down the balance more quicklyfaster, also for up to 20% in a given year.

Look at the following scenario:

A teacher who is a prospective home buyer will receive his graduate degree in nine months, at which time he is eligible for an automatic salary increase. He believes he is better off buying now rather than waiting until his increase. He can take out a 25 year mortgage at 5.4% and pay $1,209.17 per month, or a 35 year mortgage and pay $1,305.18. After two years, afterhis salary has increased by 20%, he starts paying an extra $200 on his home loan. By paying $1,253.18 instead of $1,053.18 per month, and if he makes no other changes, his mortgage will be paid off in 22.4 years, or 24.4 years in total. (prêt hypothecaire)

What conclusion can we take from this?
Choosing an extended period mortgage (prêt hypothécaire) amortization may not be for you, but this is one of the many tools that we can use to design a mortgage strategy that is just right for you.

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Gregory is an Accredited Mortgage Professional (AMP). To get more information on Home Loans - pret hypothecaire, please visit: Hypotheque | Mortgage

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