Buying a home? It’s important to understand how different mortgage term lengths can affect the cost of owning a home.
A mortgage term is the period of time for which the interest rate and other details of a mortgage contract apply. When the term ends, you must renew, refinance or pay the outstanding balance.
Mortgage terms can be anywhere from a few months to many years. In Canada, the most common term is five years. Shorter terms typically have lower rates, but you’ll have to renew or refinance sooner. While longer terms tend to have higher rates, you wouldn’t have to worry about renegotiating for a longer period of time.
Example: “Eugene’s mortgage had a five-year term and a 25-year amortization, so he expected to renew it four times before the mortgage was paid off completely.”
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