Mortgage Term

Your mortgage term is the duration of your current contract with the lender — most commonly 5 years in Canada, but available from 1 to 10 years. At the end of the term you renew at whatever rate the lender offers, switch to a different lender (subject to discharge fees and re-qualification), or pay the mortgage off in full. The term is distinct from amortization. Amortization is the total time the loan takes to pay down to zero (typically 25 years); term is the length of one rate contract within that amortization. A typical Canadian goes through five 5-year terms before paying the mortgage off. Shorter terms mean more frequent renewals (and more rate-cycle risk), while longer terms lock in your rate for longer at the cost of less flexibility — breakage penalties on a fixed-rate term can be substantial via the interest-rate-differential calculation.