Personal Finance

what happens after 5 yr fixed term

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  • Oct 3rd, 2014 10:08 am
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[OP]
Deal Addict
Nov 26, 2011
1961 posts
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Ottawa

what happens after 5 yr fixed term

What happens after a 5 yr fixed term for a 25 year amortization period. Say i get a $300,000 mortgage for 25 years with like 3% interest. Say my mortgage payment is $1419.17/month. I also make additional payments of $30,000/yr. After 5 years i still have $93,071.90 on the principal remaining. What happens then?

I shop around for best interest rate?
Do my monthly payments go down since i was paying annual additional payments?
Is my mortgage ammortized at 20 years on $93,071.90 therefore i would pay just over $500/month for a mortgage?
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Deal Addict
Oct 13, 2009
1551 posts
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Ottawa
masoud100 wrote: What happens after a 5 yr fixed term for a 25 year amortization period. Say i get a $300,000 mortgage for 25 years with like 3% interest. Say my mortgage payment is $1419.17/month. I also make additional payments of $30,000/yr. After 5 years i still have $93,071.90 on the principal remaining. What happens then?

I shop around for best interest rate?
Do my monthly payments go down since i was paying annual additional payments?
Is my mortgage ammortized at 20 years on $93,071.90 therefore i would pay just over $500/month for a mortgage?
you can redo everything, interest rate, amortization period etc... all up to you at renewal time. Dont forget to shop around 6 months out to not get stuck with whatever your current mortgage offers you to renew at. But yes, assuming everything moves forward at status quo then your payments would drop drastically and is a good thing.
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Sep 30, 2003
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chriscabob wrote: you can redo everything, interest rate, amortization period etc... all up to you at renewal time. Dont forget to shop around 6 months out to not get stuck with whatever your current mortgage offers you to renew at. But yes, assuming everything moves forward at status quo then your payments would drop drastically and is a good thing.
Agreed. Alternately, if you're good with your payment levels you can keep them as is and remove what's left that much quicker.
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Aug 29, 2006
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Is a new start on the borrowing so you can do a lot, like pay more off, negotiate for a better deal else where, etc.

Some people moved a bit of it to a line of credit too, so you will pay a bit less interest.
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[OP]
Deal Addict
Nov 26, 2011
1961 posts
188 upvotes
Ottawa
chriscabob wrote: you can redo everything, interest rate, amortization period etc... all up to you at renewal time. Dont forget to shop around 6 months out to not get stuck with whatever your current mortgage offers you to renew at. But yes, assuming everything moves forward at status quo then your payments would drop drastically and is a good thing.
Thank you for the information. What is the lowest and highest amortization period I can choose? Also what is the max amount of additional payments I can make a year. I have heard conflicting reports that say 5% of the mortgage, 15-20% of the mortgage, to unlimited amount? What is the correct answer. My main goal is to finish off the house as soon as possible less than 10 years. Or atleast to pay a big chunk of it right away so the interest is low.
Deal Addict
Jun 20, 2011
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VANCOUVER
The additional payment amount would depend on your financial institution. Which is probably why you are getting diff answers. Check your mortgage docs, it should tell you.
[OP]
Deal Addict
Nov 26, 2011
1961 posts
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Ottawa
DDHLeigh wrote: The additional payment amount would depend on your financial institution. Which is probably why you are getting diff answers. Check your mortgage docs, it should tell you.
I have not gotten a mortgage yet but will hopefully this month as I am currently in negotiating process with seller. I just want to know what others are able to give as additional payments and what bank so that it gives me an idea.
Sr. Member
Dec 4, 2004
652 posts
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GTA
A typical closed mortgage would have a prepayment option of 10-20% of the original principle per year. It really does depend on the bank and your specific mortgage terms, as others have said. Like anything else, these terms can be negotiated. An open mortgage would have no prepayment limit, but would usually entail a higher APR.
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Jun 8, 2008
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Toronto
masoud100 wrote: I have not gotten a mortgage yet but will hopefully this month as I am currently in negotiating process with seller. I just want to know what others are able to give as additional payments and what bank so that it gives me an idea.
We are able to up each payment by 15 or 20% (can't remember), pay down a lump sum payment of up to 10% of our original mortgage, and do as many double up payments as we wished through the year (or we could do all three of these). We also have the option to pay accelerated weekly payments as opposed to biweekly or monthly payments. This is with RBC.

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