25-Year vs. 30-Year Amortization: What’s the Difference (and Which One Should You Choose)?

When you’re getting a mortgage, one of the key decisions you’ll need to make is how long you want to take to pay it off. That’s called your amortization period, and for most people, it comes down to two options: 25 years or 30 years.

With the recent changes allowing first-time homebuyers or those purchasing new construction to stretch their amortization to 30 years even with less than 20% down, it’s a good time to revisit what that actually means. Let’s walk through the difference between the two and how to decide what makes the most sense for your situation.

What’s the Actual Difference?

The amortization period is the total length of time it would take to pay off your mortgage in full, based on your scheduled payments. A 30-year amortization spreads your payments out over a longer period than a 25-year amortization, which means:

• Lower monthly payments with 30 years

• More interest paid over the life of the loan

• Slightly easier qualifying on the debt servicing side (since the payments are lower)

When a 30-Year Amortization Might Make Sense

• You want a lower monthly payment to free up cash flow for other priorities like saving, investing, or managing household expenses.

• You’re buying at the top of your budget and need a longer amortization to meet lender qualification guidelines.

• You plan to make extra payments when possible, but want the lower minimum payment as a safety net.

When a 25-Year Amortization Might Make Sense

• You want to pay off your mortgage faster and reduce the amount of interest you’ll pay over time.

• You’re comfortable with a higher monthly payment and don’t need the flexibility that comes with lower payments.

A Quick Example

Let’s say you’re taking out a $400,000 mortgage at 5.25%:

• 25-Year amortization: $2,384/month

• 30-Year amortization: $2,195/month

That’s a difference of nearly $200/month, but over time, the 25-year amortization will save you tens of thousands in interest.

So Which One is Better?

There’s no one-size-fits-all answer. It really depends on what matters more to you: lower payments today or less interest paid over time. Some people choose 30 years for the flexibility, then accelerate their payments once they’re more financially comfortable.

If you want help running your numbers both ways, I’d be happy to show you how each option looks with your budget.

Call or text (902) 402-9779, or visit www.gregmatthews.tmgbroker.com/apply.aspx to fill out a five-minute pre-approval form.