Mortgage Term

A mortgage term is the length of your current mortgage contract with a lender — the period during which your interest rate, payment rules, and conditions stay in force. A term is always shorter than the amortization period, so many borrowers pay off a single mortgage across several consecutive terms.

In Canada, terms commonly range from six months to ten years, with five years being the most familiar choice. The term is what you actually sign; the amortization is only the schedule used to calculate your payment.

Term vs. amortization: two different clocks

Suppose your amortization is 25 years. That figure describes the notional time needed to reach a zero balance if nothing changes. Your term might be five years, at which point the contract matures and the remaining balance is renewed, switched, or refinanced under new conditions. The difference between term and amortization matters because only the term determines how long your current rate is protected.

Lenders also assess your file against the federal mortgage stress test, which generally requires you to qualify at a rate higher than the one you signed for. That qualifying rate is tied to your contract rate and to the published benchmark, so it can shift each time you renew.

Why term length matters

• Short terms mature sooner, so your rate resets more often and your payment can move with the market. They are sometimes chosen when a borrower expects rates to fall.
• Mid-length terms, widely used in Canada, balance rate certainty against flexibility.
• Long terms offer more payment certainty, but lenders often price them higher because they carry more interest-rate risk.

Term length also interacts with your prepayment privileges: most contracts allow extra payments or lump sums within limits each year, and going beyond them can trigger a penalty.

What happens when the term ends

Your lender typically sends a renewal statement before maturity. You can renew with the same lender, switch to another, refinance, or pay the balance out. If you break the term early, a prepayment penalty usually applies — commonly three months' interest on variable-rate mortgages, and the greater of three months' interest or the interest rate differential on many fixed-rate mortgages. Confirm the exact calculation in your mortgage commitment.