What is the difference between my mortgage term and amortization period in Ontario?
The term and amortization of a mortgage are two different but related time periods that buyers sometimes confuse. Understanding both is essential to planning your finances.
The amortization period is the total length of time over which your mortgage is scheduled to be repaid in full — for example, 25 years. This is the period used to calculate your regular payment amount. A longer amortization means lower monthly payments but more interest paid over time.
The term is the length of time your specific interest rate and mortgage conditions are locked in — commonly 1, 2, 3, or 5 years in Canada. At the end of the term, you renew your mortgage at whatever rate the lender offers (or you switch to a new lender), and another term begins. You continue renewing through multiple terms until you reach the end of your amortization period.
Most borrowers in Canada use five-year closed terms, though one-year and variable options are also popular. A shorter term offers flexibility to renegotiate sooner but involves more uncertainty about future rates. If you are comparing mortgage products, always compare both the rate and the term to understand what you are committing to. Your lawyer reviews the term in the commitment letter before closing to ensure it aligns with your plans.
Key takeaways
- The amortization is the full repayment schedule (e.g., 25 years); the term is the period your rate is fixed (e.g., 5 years).
- You renew your mortgage at the end of each term until the amortization ends.
- A shorter term provides flexibility; a longer term provides rate certainty.
- Most Canadian mortgages use a 5-year term with a 25-year amortization.