Mortgage Amortization Extension
One possible strategy to provide financial breathing room in the current economic environment is a mortgage amortization extension.
An amortization period is the duration it takes to fully pay off your mortgage through regular payments. An amortization extension refers to any period beyond your initially qualified amortization.
Prime lenders, who are federally regulated, typically do not offer amortization extensions beyond 30 years. However, if your current mortgage has a shorter amortization period (i.e. 20 years), you can extend it when refinancing with them. Alternative mortgage lenders, often referred to as "non-bank" lenders, may offer extensions of 35 to 40 years, provided you have at least a 20% down payment or more than 20% equity built up.
First-time home buyers are typically limited to a maximum amortization period of 25 to 30 years. Most put less than 20% down needing default mortgage insurance that restricts amortization to a maximum of 25 years. However, if they have 20% or more to put down, they can extend the amortization beyond 25 years.
In contrast, renewers may have the option to extend their amortization at the time of renewal. For example, they can go from 20 years back to 25 years or from 25 years back to 30 years to lower their monthly payments.
It is important to understand that extending your mortgage amortization outside of renewal would require refinancing, which may incur penalties and necessitate requalification at current rates. Nevertheless, refinancing can be a viable solution in certain circumstances.
John Chrisanthidis, Mortgage Broker (FSCO Lic. M08001294 Mortgage Intelligence FSCO Lic. 10428)