Mortgage Payment Schedule 101: Your Ultimate Guide

There are many factors to consider when thinking about your mortgage terms and payment schedules. You’ll want to know your options before you determine the best payment schedule for you. 

We’ve created this guide to help you determine all the specifics of your mortgage payment. These are the main factors to consider when ironing out your mortgage payment schedule:

Mortgage payment types

There are two common mortgage payment types: combination of principle and interest and interest only. The principle and interest rate means every time you make a payment, you’re paying both interest and principal amount of the original loan. Interest only payments make a dent on the interest of the mortgage first and foremost. Over time, they begin to impact the principal amount as the interest becomes lower. 

Choosing the right mortgage payment schedule can be tricky. Although it might be tempting to pay the lower amount each month, this can make the overall mortgage cost more in the long run. However, it might not be financially feasible based on your monthly income. That’s why it’s important to consider all the options.

If you want to pay off your mortgage faster, there are a few contract areas you can negotiate to make this happen. 

How to pay off your Canadian mortgage faster:

Amortization
Amortization is the time it will take you to pay off your mortgage, as defined by your mortgage contract. You can decrease this period and make larger or more frequent payments, reducing your interest costs over time. Talk to your mortgage broker if you need help making this choice. 

Increase Down Payment
Paying more upfront for your home will reduce the amount you owe in mortgage, therefore reducing the amount you pay in interest over time. If you have more money upfront or can borrow it from family, this could be worth doing.  

Interest rates
You have the choice between fixed and variable interest rates when establishing the terms of your mortgage. Fixed rates will lock in the market rate at the time of establishing the contract. This can prevent you from dealing with rising interest rates in an unpredictable economy, but variable interest rates can also be lower. Ask your mortgage broker which interest rate is best for you.

Open and closed mortgages
When negotiating your contract, you might also have a choice between an open and closed mortgage. An open mortgage means you can make extra payments to your mortgage at any time. If you get a bonus at work and want to put it towards your mortgage, you can do that easily. 

With a closed mortgage, on the other hand, you can’t necessarily make a lump sum payment without a prepayment charge. However, closed mortgages also usually come with lower interest rates, which saves you money in the long run.

Hire a mortgage broker
If you’re still confused about interest rates and amortization periods, not to worry. Hire a mortgage broker and let us handle it. Your Mortgage Guide is here to help. We’ll make sure you understand everything you need to know about the mortgage process so you can make the best decisions for you and your family. 

If you’re ready to go over your options with an expert, book a call today.