Joan Manuel - Royal LePage Sales Representative

Joan's Listings

About Joan

A Friend

Joan's Links

Amortization

The amortization of a mortgage is the length of time it would take you to pay off the mortgage. A mortgage with a 25 year amortization would take 25 years to pay off, at the set monthly payment.

A mortgage may be renewed several times through its amortization period. A mortgage could have a number of terms of different length through the 25 year amortization that it takes to pay off the mortgage.

With a shorter amortization period, you will pay less interest, but your monthly payment will be higher. A longer amortization will reduce your monthly payment, but you will pay more interest over the full life of the mortgage.

The following example illustrates a $150,000 mortgage at 8.5% and compares the total amount paid and the interest paid over the full life of the mortgage.

A 30 year amortization more than doubles the interest cost of a 15 year amortization.

COMPARING AMORTIZATION PERIODS
(With a $150,000 mortgage at 8.5% compounded semi-annually)

AMORTIZATION PERIOD	MONTHLY PAYMENT($)	TOTAL PAID($)	TOTAL INTEREST($)
15 years	1,470	265,000	115,000
20 years	1,290	310,000	160,000
25 years	1,200	360,000	210,000
30 years	1,140	410,000	260,000

Note: For simplicity, the monthly payment figure in the above illustration has been rounded to the nearest $10. Total paid and total interest are rounded to the nearest $1000. For exact calculations, see your mortgage specialist.

Monthly Mortgage Payment Calculation Chart

This Monthly Mortgage Payment Calculation Chart will help you determine what your monthly mortgage payments will be given various interest rates and amortization periods.

Interest Rates (%)	Amortization Periods
Interest Rates (%)	5 years	10 years	15 years	20 years	25 years
7	19.75407	11.55940	8.93249	7.69311	7.00416
7¼	19.86867	11.68461	9.06834	7.83897	7.15919
7½	19.98355	11.81047	9.20514	7.98602	7.31555
7¾	20.09871	11.93696	9.34287	8.13423	7.47321
8	20.21416	12.06409	9.48153	8.28357	7.63213
8¼	20.32988	12.19185	9.62110	8.43404	7.79229
8½	20.44589	12.32023	9.76158	8.88590	7.95364
8¾	20.56217	12.44924	9.90294	8.73822	8.11614
9	20.67873	12.57886	10.04519	8.89190	8.27978
9¼	20.79557	12.70909	10.18830	9.04660	8.44450
9½	20.91267	12.83992	10.33227	9.20231	8.61028
9¾	21.03005	12.97135	10.47707	9.35900	8.77708
10	21.14770	13.10337	10.62270	9.51665	8.94488
10¼	21.26562	13.23598	10.76915	9.67523	9.11362
10½	21.38380	13.36917	10.91640	9.83473	9.28330
10¾	21.50226	13.50294	11.06445	9.99513	9.45386
11	21.62097	13.63729	11.21327	10.15640	9.62529

HOW TO USE THIS CHART:

Determine the amount of your mortgage in dollars.
Look down the chart's left column and locate the interest rate you expect to pay. Now look at the top of the chart to find your expected amortization period. Choose the number at the intersection of your chosen interest rate and amortization period.
Multiply this number by the amount of money you need to borrow. Divide this by 1000 to arrive at your approximate monthly mortgage payment amount (principal and interest).

For example, the monthly mortgage payment for a $125,000 mortgage with a 25-year amortization period at 8% is : ($125,000 ÷ 1,000) X 7.63213 = $954.02.

Chapter Overview | Previous

NOTE: To obtain a copy of the book for yourself please do not hesitate to contact Joan Manuel.
If you would like to print out a copy of the provided portion of chapter 2 for your own reference please refer to the printable version.

Last Update: March 14, 2000