Since the new rules and regulations regarding Canadian mortgages. I wanted to explain how the 25 year amortization will affect a homeowner.
So, what does it actually mean? Well amortization means the length of time in which you have to pay off your loan. With a shorter amortization period, the home owner will actually save more money (interest).
With those additional funds saved. Homeowners, can spread the extra cash flow onto other major family life events. For example, college funds, renovations on the home, or even a well deserved vacation.The funny thing with the new 25 year amortization is that, it's not new. Back the in day, and I mean back in the day that was the norm. I guess, we as younger Canadians, got use to having an amortization of 30, and 35 years.
In the long run, paying more upfront and saving thousands in the end is a well deserved pay off in my opinion.
Here is a chart outlying the difference in the amortization period of 25 year and 30 year.
| 25-Yr Amortization | 30-Yr Amortization | |
| Mortgage Value | $400,000 | $400,000 |
| Mortgage Rate | 5% | 5% |
| Bi-Weekly Payment Amount | $1,068.87 | $980.81 |
| Total Interest Costs | $297,092.55 | $367,588.30 |
| Total Savings | $70,495.75* | |
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