Short answer: Your term is the length of your current mortgage contract and rate, usually one to five years (five is most common). Your amortization is the total time to pay the mortgage off, usually 25 or 30 years. When a term ends you renew for another term until the amortization is done. A longer amortization lowers your payment but increases total interest.
What Is a Mortgage Term?
The term is how long your current agreement with the lender lasts. In Canada, terms run from six months to ten years, and five years is the most common. During the term your rate (if fixed), payment and conditions stay the same. At the end, you renew, switch lenders or pay it off.
What Is Amortization?
The amortization is the full length of time it would take to pay off the mortgage at the current payment. It’s usually 25 years, or up to 30 years for first time buyers, new builds and most mortgages with 20% or more down.
How They Work Together
A 25 year amortization is usually paid off over five back to back five year terms. Each renewal is a chance to change your rate, term, lender and even the amortization.
How Amortization Affects Your Payment
On a $500,000 mortgage at 4.5%:
| Amortization | Monthly payment (approx.) |
|---|---|
| 25 years | $2,770 |
| 30 years | $2,520 |
The 30 year option saves about $250 a month but costs more interest over the life of the mortgage. Try the mortgage payment calculator.
How to Choose a Term
- Shorter term: more flexibility if you might move or refinance, or expect rates to fall
- Longer term: payment certainty for longer
- Think about penalties: breaking a longer fixed term early can be expensive
How to Choose an Amortization
- Longer: lower payments and more breathing room, more total interest
- Shorter: higher payments, mortgage free sooner, less interest
- Many people take the longer amortization for flexibility, then use prepayment privileges to pay it down faster
→ Related: Prepayment Privileges and Penalties
How We Help
We model terms and amortizations side by side so you can see the payment and total cost of each. Book a call.
Frequently asked questions
What is the difference between term and amortization?
The term is how long your current rate and contract last, usually one to five years. The amortization is how long it would take to pay the whole mortgage off, usually 25 or 30 years. You go through several terms over one amortization.
What is the maximum amortization in Canada?
25 years for an insured mortgage (under 20% down), or 30 years for first time buyers and buyers of new builds. With 20% or more down, most lenders allow up to 30 years.
This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed and powered by Mortgage Connection Inc.
Lacroix Mortgage Group, licensed and powered by Mortgage Connection Inc.
Tim Lacroix, Mortgage Broker · Alberta licence CON-00005179 (RECA) · BC licence 503533 (BCFSA)
Call or text (403) 648-1541 · hello@lacroixmortgage.com · Calgary, Alberta