The term of a mortgage is the length of time your current mortgage agreement lasts. At the end of the term, you either pay off the loan in full or renew it with your lender (or a new lender) under new conditions.
Typical Lengths
- Short-term (1–3 years): Often comes with lower rates but requires more frequent renewals.
- Medium-term (4–5 years): Balances stability and flexibility for many borrowers.
- Long-term (7–10 years): Locks in rates for longer but may carry higher interest costs.
How It Differs from Amortization
The term is not the same as the amortization period. The amortization period is the total time it takes to pay off the mortgage in full, while the term is just the current contract period. For example, you may have a 25-year amortization but a 5-year term, meaning you’ll need to renew several times before the loan is fully repaid.
Why It Matters
Choosing the right term affects your interest costs, payment stability, and flexibility. Shorter terms may offer lower rates, but longer terms provide security if interest rates rise. Borrowers should match the term to their financial goals and risk tolerance.
Final Thoughts
The mortgage term is a key factor in home financing. Understanding how it interacts with the amortization period and renewal process helps borrowers make informed decisions about their loans.