What is the difference between term and amortization?

The term is how long your current contract and rate last, often 1 to 5 years. The amortization is the total time, often 25 years, it takes to pay the mortgage off entirely across multiple terms.

What happens at the end of my term?

Your mortgage reaches its maturity date. You can renew with your current lender, switch to a new lender, refinance, or pay off the remaining balance in full.

Is a longer term always better?

Not necessarily. A longer term locks your rate for more years but can cost more to break early. A shorter term offers flexibility but means renewing and re-qualifying sooner.

Mortgage Glossary

What is Term?

A mortgage term is the length of time your mortgage agreement and its conditions, including your interest rate, remain in place. Common terms in Canada range from 1 to 5 years, though shorter and longer terms exist. The term is different from the amortization period, which is the total time it takes to pay off the entire mortgage.

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Quick answer

Also known as: Mortgage term

Key points

The term sets how long your rate and conditions are locked, commonly 1 to 5 years.
It is different from the amortization, which is the total payoff timeline.
At the end of the term you reach the maturity date and must renew, refinance, or pay off.
Longer terms give rate certainty; shorter terms offer earlier flexibility.
Breaking a term early can trigger a prepayment penalty.

Term explained

Your term is the contract window. When it ends, the mortgage reaches its maturity date and you must renew, refinance, or pay off the remaining balance. During the term your rate is locked (on a fixed-rate mortgage) or moves with the lender's prime rate (on a variable-rate mortgage), and the prepayment privileges and penalties set out in your agreement apply.

A single amortization period usually spans several terms. For example, a 25-year amortization might be made up of five consecutive 5-year terms, with the borrower renewing and possibly renegotiating the rate at the end of each one. Choosing a term length is a balance between rate certainty, flexibility, and the cost of breaking the contract early.

What a Term is for

The term exists to define how long the agreed rate and conditions are guaranteed. Lenders use it to price the loan, and borrowers use it to decide how long they want certainty versus how soon they want the freedom to renegotiate or move lenders.

How it can help you

Choosing the right term helps you balance predictability against flexibility. A longer term locks your rate for more years; a shorter term lets you renegotiate sooner if you expect rates to fall or your plans to change. Lenderoo shops 40+ lenders for free, so you can compare rates across different term lengths and find the one that fits your timeline.

When it comes up

A borrower who expects to move in three years chooses a 3-year term rather than a 5-year term, so their contract matures around the time they plan to sell and they avoid a larger penalty for breaking a longer term.

Example: Terms within an amortization

A buyer takes a $400,000 mortgage with a 25-year amortization and chooses a 5-year fixed term at the outset.

For those 5 years, the rate and conditions are locked. At the end of year 5 the term matures with roughly $340,000 still owing. The borrower then renews into a new term, perhaps another 5 years, at whatever rate is available then. They will pass through several terms before the full 25-year amortization is complete and the mortgage is paid off.

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Questions & answers

Term: frequently asked questions

Common questions Canadians ask about term.

Keep learning

Related mortgage terms

Amortization Period

The total length of time it takes to pay off a mortgage in full through regular payments.

Read definition

Renewal

Renegotiating your mortgage terms at the end of a term.

Read definition

Maturity Date

The date when a mortgage term ends and the loan must be renewed or paid off.

Read definition

Fixed-Rate Mortgage

A mortgage with an interest rate that remains constant.

Read definition

Variable-Rate Mortgage

A mortgage whose interest rate moves up or down with the lender's prime rate over the term.

Read definition

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Find my best mortgage Explore the glossary

Mortgage Glossary

What is Term?

Find my best mortgage Back to glossary

Quick answer

Also known as: Mortgage term

Key points

The term sets how long your rate and conditions are locked, commonly 1 to 5 years.
It is different from the amortization, which is the total payoff timeline.
At the end of the term you reach the maturity date and must renew, refinance, or pay off.
Longer terms give rate certainty; shorter terms offer earlier flexibility.
Breaking a term early can trigger a prepayment penalty.