Everything You Need To Know About Mortgage Payment Schedules

A mortgage payment schedule is a plan outlining the repayment process of your loan, also known as an amortization schedule. When you sign your mortgage contract, your lender will set out a program that divides your mortgage into equal or near-equal monthly, weekly, or bi-weekly installments. Given that, for the most part, you can negotiate the terms of your mortgage contract.

Breaking Down Your Mortgage Payment Schedule

A mortgage payment schedule is a complete table of your recurring loan payments, showing the breakdown of each payment until the loan is paid off, while also showing how much will have been paid and how much will be remaining at the end of its term. These payments are often uniform in size and frequency.

There are two types of common mortgage payment types. The first is a combination of principal and interest, and the second is interest-only.

With the first option, every time you make a monthly mortgage payment, your capital is divided into two categories: principal and interest. This is often referred to as a P&I payment. External costs such as homeowners’ insurance or property taxes may need to be paid separately. In the case of the second option, the borrower only makes interest payments and none of the principal is paid down by the end of the term. This is typically only seen with private mortgage lenders.

Different Types of Mortgage Payment Schedules

Choosing the right mortgage payment schedule can be a daunting task. There are many factors to consider. It might be tempting, for instance, to select a plan that demands small monthly payments over a more extended period. However, longer plans generate greater interest costs in the long run. This means that it will take longer to pay off your mortgage completely if that is your goal. The best way to investigate different mortgage payment schedules is to start with a typical program and then play around with the variables until you find your ideal conditions.

How to Speed Up Your Mortgage Payment Schedule

If you are looking to speed up your mortgage payment schedule, there are a few aspects of your contract you may be able to negotiate with your lender so that your loan suits your needs. Here are a few of the changes you can possibly request:

Cut Your Amortization Period

Your amortization period is often set out in your mortgage contract. It is the amount of time it will take to finish your P&I payments and pay off your loan in full. You can shorten your amortization period by increasing the size or frequency of your payments. A fast amortization period will reduce your interest costs in the long run.

Make a Larger Down Payment

The more money you put down, the less money you must borrow. A smaller mortgage will always be easier to pay off and speed up.

Consider Your Interest Rate

When taking on a mortgage, you are often given a choice between a fixed and a variable interest rate.Fixed-rate mortgages will lock in the market rate at the time of your contract signing and will continue to apply that rate for the duration of your term. This type of mortgage can shield you from the effects of rising interest rates.

On the other hand, variable-rate mortgages will constantly change their interest rates to match the market. When rates rise, you will lose out, but you will benefit when rates drop.The lower your interest rate, the easier your loan will be to pay off, and the faster you can pay it. You should choose the interest rate that you feel will be most advantageous to you in the long run.

Work With Professionals

Shortening your mortgage payment schedule is easier said than done. Most lenders do not want you to shorten your amortization period as they may lose out on your interest payments. Sometimes, it takes a team of professionals to help negotiate the perfect contract for you— on your terms. Rajan Saggi actively works with many lenders in British Columbia. Hecan help you explore your options, negotiate your terms, and connect you with the right mortgage lender for your individual situation and needs.

Contact Rajan Saggi @ 604-767-5050 to schedule aconsultation!

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