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How does the amortization period affect the interest cost I pay on my mortgage?
The longer the amortization period, the more your interest costs will be. It is to your advantage to choose the shortest amortization— that is, the largest mortgage payments—that you can afford. You will pay off your mortgage faster and will save thousands or even tens of thousands of dollars in interest in the long run.
The following table shows how much interest you would pay if you were making monthly payments on a mortgage of $250,000, with a fixed annual interest rate of 5%.
|Amortization||Monthly payments||Total amount of interest paid|
In the table above:
To learn more about how to pay your mortgage down faster, read FCAC’s publication Paying Off Your Mortgage Faster.