Why these terms cause confusion

Amortization is how long it takes to fully pay off your mortgage.
Term is how long your interest rate and contract are locked in before renewal.

  • How long will it take to fully pay off the mortgage?
  • How long is my current rate and contract locked in?

Once you separate those ideas, mortgages become much easier to understand.

What amortization means

Amortization is the total length of time it would take to pay your mortgage down to zero, assuming you follow the payment schedule.

  • Common amortizations in Canada are 25 or 30 years
  • Longer amortization means lower payments, but more interest overall
  • Shorter amortization means higher payments, but less interest over time

What a mortgage term means

Your term is the length of time your mortgage agreement lasts before renewal.

  • Common terms are 1, 3, or 5 years
  • Your rate and conditions apply only during the term
  • At renewal, you choose a new rate and term

Renewing doesn’t reset your mortgage — it simply continues the journey.

How amortization and term work together

Here’s a simple example:

  • You start with a 25-year amortization
  • You choose a 5-year term
  • After 5 years, you renew
  • You now have roughly 20 years remaining

Each renewal moves you closer to payoff, assuming payments stay on track.

What happens when rates change

Interest rate changes often show up at renewal:

  • If rates rise, payments may increase to stay on schedule
  • If payments stay flat, amortization can quietly stretch longer
  • If rates fall, you may pay the mortgage off faster

This is why understanding amortization matters just as much as chasing the lowest rate.

Amortization creep

Amortization creep happens when renewals quietly extend how long your mortgage lasts.

  • Payments feel manageable
  • But years — and interest — are added in the background

Extra payments, even small ones, can help keep amortization under control.

A simple way to think about it

  • Term = short-term agreement
  • Amortization = long-term plan

Smart mortgage decisions consider both.

Quick reminder: This guide is educational only. Mortgage rules and lender policies vary, so use this as a foundation rather than personal advice.

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