Amortization Period - Change 40yr to 25yr

[Merriora]

Hello

I searched through the forums, but could not find an answer to the following...

If I were to go with a 40 yr Amortization on a property with a 5 yr fixed rate, would I be able to change the amortization period later on without penalty after my 5yr fixed rate expired and was up for renewal?

ie: Select 40yr Amortization now to keep costs low...In 5 yrs I decide that I want to pay off the mortgage sooner, so I want to change the Amortization to 25yrs and pay more per month...Would this be possible without penalty assuming my 5yr rate had expired?

NOTE: I am aware of my options to pay down the mortgage depending on my terms (ie: 20% pay down per year)


Thank you,

 

[GarthChapman]

Great question Merriora,

My experience has been `yes, you can`, and I think the option is always available on the maturity of the mortgage. I am not sure under what scenarios you could do this other than at maturity, such as on the annual anniversary date.

You may want to post this query on the `Ask an Expert` - Financing sub-forum. That should attact the mortgage broker experts who should have all the answers on this for you.

Hope that helps,

 

[RobMacdonald]

Hi,

Most institutions will allow you to decrease your amortization, but you may be held by the original terms of the mortgage. Decreasing the mortgage amortization is actually a function of increasing the payment amount. So for most lenders, you will be limited to a 15% to 20% increase in the monthly payment.

You can increase the payment with most lenders every year, some require it on the anniversary date and others at any time through the year. So if you don`t accomplish the reduction from 40 down to 25 this year, then you can increase it further in the following year.

Happy New Year!

 

[MikeMcCrae]

The good thing about the 40 year mortgage is you are on contract for the lower payment so that is the number you use when you apply for your next mortgages. If you want to pay it out sooner you can use the extra payment provisions and actually pay more (which lowers the ammortization) but you are legitimatley required to pay less. Best of both worlds!