What is Amortization Period? In Canada, the Government has recently extended the mortgage period up to 35 years to facilitate middle income families and recently arrived immigrants to own a home. Normally a mortgage is a secured loan, by some property and so the interest rates are usually very nominal. However, if one is unable to repay the mortgage as agreed, there is a chance that they may lose the security.

The time period taken to repay the mortgage in full is called amortization period. Typically this may be between 20 to 25 years. The longer the mortgage runs the more interest one pays. One has to take into consideration one's monthly budget and then decide on the mortgage period by calculating the monthly payments and the total cost (inclusive of interest) to arrive the ideal time frame.

On a fairly large mortgage, the savings would be quite significant if the mortgage period can be reduced to a minimum possible number of years. On an average, in Canada, a person can save up to a few thousand dollars a year in interest if they reduce one year from their amortization period. One prudent option would be to settle for a longer mortgage period and as one's financial situation improves, go for a renewal with a lesser number of years.

In case one needs a consolidation loan, this sort of mortgage makes very good sense as one would have the liquid cash to pay off one's debts at a very low interest. It would also be advisable to engage the services of a mortgage broker as they can negotiate better for rates and number of years with various banks and get you the best possible deal and the most viable amortization period. But first work out a monthly budget to see if the mortgage would be a viable option so that you do not land yourself in a vicious cycle of going for a loan to repay another loan.

In Canada, given that each province has its own taxes and levies and procedures, it would be best to consult a mortgage broker before deciding on a loan. One can opt for a new mortgage to secure a debt consolidation loan, or use it for refinancing a loan, or to make a lump sum payment to settle a debt. Regardless of the reason for going in for a mortgage the most crucial factor should be the amortization period.

The federal government does its best to facilitate housing for the moderate income population. These steps have not been quite as successful as the government intended. The lesser income group has no choice but to go for a longer mortgage period, thereby end up paying more interest on their mortgages. This problem has to be addressed before the new initiatives become popular and the demand for housing among the lower income groups increases.

The government hopes to revive the sluggish real estate and construction industries by stretching the amortization period, and by offering an option of paying the interest alone for the first 10 years of the loan period, thus effectively increasing the mortgage period to 35 years. What is Amortization Period?

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