Amortization Period Can Help Your Vancouver Buyers Qualify

By
Mortgage and Lending with The Mortgage Centre

Think You're Paying Too Much Interest If You Amortize Over 35 Years?  Think again!

Here's this Vancouver Mortgage Broker`s opinion...go as long as you can and here`s why! 

•·         $1,000 mortgage monthly payment / 25 years is equivalent to 845.32 over 35 years.

•·         4.30% interest rate (amortization periods do not mean a higher interest rate)

25 YEAR MORTGAGE:
PAYMENT               INTEREST                PRINCIPLE
#1                              $653.96                     $346.06
#2                              $652.73                     $347.29
#3                              $651.50                     $348.52
#4                              $650.27                     $349.75
#5                              $649.03                     $350.99

35 YEAR MORTGAGE:
PAYMENT               INTEREST                PRINCIPLE
#1                              $653.96                     $191.34
#2                              $652.73                     $192.02
#3                              $651.50                     $192.70
#4                              $650.27                     $193.39
#5                              $649.03                     $194.07

  • INTEREST PAID is the same in both cases, no matter the amortization. Plus why strap yourself down with payments higher than you need to.
  • The best solution is to increase your payments by the allowed amount (typically 10% to 20%) and go bi-weekly. If the worst should happen, for example a job loss or pay decrease, at least you have the option to revert back to monthly payments and decrease your payments.
  • The longer amortization can help your Buyers qualify for the home they really want as the LOWER principle and interest payment keeps the debt servicing ratios down...translating into a higher overall approval amount.

Why not take your monthly savings and tackle higher interest rate debt of contribute to an RRSP and take the tax savings and put it down on the mortgage. If your Buyers say `but mom always told me not to borrow longer than 25 years`now you can help us help your clients help themselves!  

Thanks for reading!

Comments (8)

Jeremy K. Frost
Keller Williams Realty - Dripping Springs, TX
Associate Broker, ABR,CNE,CRS,ePro,PSA,RENE,SRS

Thanks for sharing...it's great posts like this one that make active rain such a great place!

Jan 19, 2010 12:09 PM
Darren Revell
Keller Williams Realty Temecula Valley - Temecula, CA

Hey!... Nice to see you here!!...  Thank you for the post.  Hope to catch you in a meeting soon...

Jan 19, 2010 05:24 PM
Elizabeth Zink | EZresults Real Estate Systems
Keller Williams Elite Realty - Coquitlam, BC

Ralna this is well written information. Perfect to show a client take the benefits of a longer amortization period (without offending them with the news they don't qualify for a 25 year period) by simply showing them the facts. Thanks for the great information!

Jan 20, 2010 10:37 AM
Fred Carver Personal Real Estate Corporation
RE/MAX Camosun Victoria BC Real Estate - Victoria, BC
Accredited Real Estate Consultant

Hi Ralina..Welcome to Active Rain, this is a great post easy to understand..thanks for the mortgage tips

Jan 20, 2010 03:44 PM
Ralna Burridge
The Mortgage Centre - Vancouver, BC

Thanks guys!

Jan 20, 2010 03:54 PM
Ralna Burridge
The Mortgage Centre - Vancouver, BC

Thank you, I'm trying to figure out how to respond...still new to all this. EZ you haven't got your blog up yet?

Jan 22, 2010 04:10 AM
Kathy Clulow
RE/MAX All-Stars Realty Inc. Brokerage - Uxbridge, ON
Trusted For Experience - Respected For Results

Ralna - your posts are educational and informative for someone looking for a mortgage.

I see you have the responding figured out.

Jan 22, 2010 03:21 PM
Ralna Burridge
The Mortgage Centre - Vancouver, BC

Thanks Kathy, I think I have it all figured out. 

Jan 24, 2010 12:25 PM