If a mortgagor prepays on his mortgage, does the remaining amortization period decrease while the monthly payment schedule stays the same or does the amortization period remain the same while the monthly payment schedule decreases? if the correct answer is that the amortization period decreases, then how does this work for canadian mortgages? lets say my term is 5 years but my amortization period is 25 years. then if i prepay, will the terms still stay 5 years but just since the amortization period has decreased, then the last term will be less than 5 years? thanks!
jimjohn Wrote: ------------------------------------------------------- > If a mortgagor prepays on his mortgage, does the > remaining amortization period decrease while the > monthly payment schedule stays the same or does > the amortization period remain the same while the > monthly payment schedule decreases? Yes the amortization will decrease, however in theory you could elect to decrease your payments and keep the amortization the same (not sure why you would want to though) > if the correct answer is that the amortization > period decreases, then how does this work for > canadian mortgages? lets say my term is 5 years > but my amortization period is 25 years. then if i > prepay, will the terms still stay 5 years but just > since the amortization period has decreased, then > the last term will be less than 5 years? > term remains the same until the term is up regardless of prepayment, however if you pay the mortgage in full before the end of the term generally speaking you will be charged a prepayment penalty (unless u r in some sort of variable open facility)…when your term is up you could renew into a variety of different terms if u desire ie 1, 2, 3, 4, 5, 7 or 10 year so matching the amortization isn’t a problem > thanks!