Choosing The Amortization Period For Your Mortgage

The period of time called the mortgage amortization period dictates the number of years it will take to completely pay off your mortgage. Historically speaking a 30 year mortgage has been the most popular, because that will create the smallest payment amount that you will have to pay each month. The 25 year and even the 15 year mortgage periods have become very popular recently as well. The longer your amortization period however, the more overall interest you will pay in the long run. The shorter the payment period, the less interest you will pay and your mortgage will be paid off sooner, but the payments will be higher.

In making the decision as to how long you should take to pay off your mortgage, you will have to take your own financial situation into account, as there are a few variables that you need to consider. At the present time, mortgage interest is a deductible item on your federal income tax. If you are in a higher tax bracket, a longer payment period could be more attractive to you. Will your lender allow for the prepayment of the principal in advance on your mortgage? If that is the case, the principal balance can be reduced and that can causes the interest charges more manageable.

A longer payment period could be more attractive to you if you have a variable income, such as working on commission or receive bonuses on an irregular basis. Choosing a longer period of amortization may allow you to purchase a more expensive home, as lenders take into account the monthly payment amount when they approve or disapprove a mortgage. A more expensive home might be more likely to be approved with a 30 year mortgage, and less likely if the mortgage were to be for 15 years.

The mortgage schedule for amortization can be different than the mortgage term, which is much shorter in many cases. This factor can allow you to reassess your strategy for your mortgage amortization allowing for changes in life circumstances.