Terms Of A Mortgage, What They Are & What To Pay Attention To

In this article, we will give you the information you need on the terms of a mortgage. First, we explain what they are, then go over how this affects the cost. Lastly, we point out the key things to pay attention to when choosing a mortgage term. 


So, what exactly is it? A mortgage term is the amount of time your mortgage contract is active. This period shows how long your financing will last. The terms of a mortgage will impact the overall cost, interest rate, and regular payment amount. 

Terms can vary from a few months to over five years. After each cycle, you will have the option to renew your mortgage if you cannot pay off the entire sum. However, you can finish paying off the whole sum of your mortgage during that period.

What are the terms of a mortgage contract


With that said, the mortgage amortization period is the time it takes for you to pay off all your mortgage. Mortgage amortization factors in interest rate to provide you with an estimate of what your mortgage cost will be. 

If you’re about to buy a new home, online calculators can help. They can give you an idea of various amortization scenarios. The calculator will do this by factoring in different mortgage rates.

To put it simply, the mortgage term period will have a set date to renew. On the other hand, the amortization period indicates how long it takes for you to pay off your home. 


The terms of a mortgage will affect your interest rate. By that, we mean that you will have different interest rate options based on the length of your mortgage. Below, we list the three kinds of mortgage terms. Each comes with benefits and considerations you should pay attention to.


Let’s discuss the terms of mortgage based on type. There are three kinds, each based on the interest rate. Many Canadians opt for a five-year mortgage term and amortize it over twenty-five years. In Canada, the current maximum amortization period, for an insured mortgage, is 25 years. It is 30 years for a conventional mortgage.


These mortgages are less than five years. In other words, you will renew your mortgage every few months or up to every five years.

A shorter term mortgage means dedicating more time to signing a new mortgage. Interest rates could change, meaning there is less stability. You could score a better rate but prepare yourself for something higher.


A longer-term mortgage means having a term of over five years. Some choose this for the sake of ease. They know their current conditions will not change for many years. This type of stability makes it easier to budget because you know exactly what you’ll be paying for the years to come. 

However, there is less flexibility with this option. You could potentially continue paying a higher rate even if interest rates drop. Lastly, this option is not for someone who frequently moves because you may be subject to pay a considerable pre-payment penalty. There may be options to port and avoid a penalty so please speak to your mortgage advisor.


Lastly, we will mention the convertible term mortgage. Some shorter-term mortgages can be extended to a longer, fixed-rate loan. This can be beneficial if interest rates fall. 


As mentioned above, the terms of a mortgage affect the interest rate for a specific time. A fixed interest rate means your rate will stay the same throughout the term period. A variable interest rate means it could change during the term, should rates fluctuate.  

When making your decision, think about what your current life situation is like. Although we can’t predict the future, try to imagine what your life will be like in the next five or ten years. Do you plan on living in this home long-term? Does your current job frequently have you transferring cities? Are you planning on having children? Additionally, there are also many unexpected life costs. Try to consider and imagine various scenarios before choosing your mortgage term. 

Luckily, first-time homebuyers can qualify for incentives that can help reduce financial strain and fast-track you to being a homeowner. 


Always read the fine print in your mortgage contract. Renegotiating could mean paying the penalty. Additionally, you could pay pre-payment penalties if you pay all your mortgage before the end of the term. Asking an expert like a mortgage broker can help you better understand your contract.  


While we hope this article provided some insight, you may have some looming questions. With that said, a mortgage broker is here for you. They can assess and provide further insight into the terms of a mortgage. Therefore, you will be better equipped to pick the best one for you.

As Calgary-based mortgage brokers, our team offers personalized mortgage solutions for you. Fill out our online application form today, and we’ll do the rest!