We all know that there are many different ways you can save money on your Toronto mortgage. You can pay a lump sum when you have extra cash, be careful with home equity loans, and you can be very careful in selecting the product with the lowest interest rate. But another way to save on your mortgage is to choose a shorter amortization period. But this last money-saving tip is somewhat interesting. How much money can it actually save you to shorten the life of your loan? And does the difference between a 25-year and a 30-year amortization really make that big of a difference.
It does. And one only has to look at the recent stats that BMO has released in order to believe it. The bank recently released a press release that show just how much customers have saved with their 25-amortization deals.
The bank, which has been famous for not only starting the mortgage wars this year, is also one that’s pushing the 25-year amortization. And it may be for good reason – BMO just announced that customers who have selected the product will collectively saved over $167 million by the time their mortgages are paid off in full.
“The response to this product has been overwhelming,” says Katie Archdekin, Head of Mortgage Products at BMO. “We’ve received a number of testimonials from across the country that tell us our customers are benefiting from a product that’s designed to help them own their home sooner and save thousands of dollars in the process.” She went on to say, “We know that our customers value products that allow them to achieve their financial goals in a way that’s affordable over the long term. Based on the most recent feedback, this product has addressed our customers’ wants and needs and we believe the savings tally will only grow with time.”
However, even though the shorter amortizations have been heaven-sent for some BMO customers, they don’t work for everyone. With a shorter amortization period, you’re going to have to pay much more on your mortgage every month; and this is not something that everyone can afford to do. However, that really is the only big drawback with a shorter amortization.
If you think that you would be able to afford slightly higher mortgage payments each month, and the thought of saving a bundle on interest sounds appealing to you, a shorter amortization, but you’ve already chosen a 30-year (or, gasp! 40-year) amortization, speak to your lender about shortening it. Just because those are the terms you have now doesn’t mean that you need to live with it forever. And even though refinancing has its own costs, with savings like these it could still be very worth it.
