What is the difference between mortgage amortization and mortgage term?
Mortgage amortization refers to the total number of years, often 25 years, that it will take you to completely pay off your mortgage. Once the mortgage amortization period is complete, the mortgage is always fully paid off and no more payments are due.
The mortgage term refers to the contracted lending period of time that the mortgage terms and interest rates are in effect. After the term expires, the borrower has 2 options: 1) To completely pay off the remaining balance of the mortgage with their own funds, or 2) To renew the mortgage for another term with either the same lender or a different one. Breaking a term early often results in prepayment penalties depending on whether your mortgage was an open mortgage or a closed mortgage. The most common mortgage term in Canada is a closed mortgage for 5 years.