What is difference between term and amortization?
Term refers to the length of time which a specific mortgage agreement covers, generally between 6 months to 5 years. When the term matures, the balance of the mortgage is either paid off or renegotiated for another term at the rates in effect at the time. Amortization Period is the number of years it would take to repay the entire mortgage amount based on a set of fixed payments. The longer the amortization, the more interest is paid over the life of the mortgage. Therefore, when choosing the amortization period, careful planning should be done to meet your cash flows. Remember, the amortization can be easily shortened after the closing, by simply making arrangements to increase your payments. These days banks offer up to 35 year amortization period. First-time buyers can choose to pay up to five percent down payment and stretch out payments for as many as 35 years. A long-amortization mortgage, combined with mortgage insurance, can help get someone into a home far sooner.
