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Your Term
The mortgage term is the length of time your mortgage contract is in effect. This consists of everything your mortgage contract outlines, including the interest rate. Terms can range from just a few months to 5 years or longer.
At the end of each term, you must renew your mortgage if you can’t pay the remaining balance in full. You’ll most likely require multiple terms to repay your mortgage.
The length of your mortgage term has an impact on:
- Your interest rate and the type of interest you can get (fixed or variable)
- The penalties you have to pay if you break your mortgage contract before the end of your term
- How soon you have to renew your mortgage agreement
Your Amortization
The amortization period is the length of time it takes to pay off a mortgage in full. The longer the amortization period, the lower your payments will be. Keep in mind that the longer you take to pay off your mortgage, the more interest you pay. If your down payment is less than 20% of the purchase price of your home, the longest amortization you’re allowed is 25 years
