Amortization is the length of time it would take to pay off the mortgage as long as the interest rate does not change, all payments are made on time and no additional payments are made. The shortest amortization is usually 5 years, and the longest is 40 years. Currently very few lenders will agree to an amortization longer than 25 years. It is to your advantage to choose the shortest amortization that you can afford. This will save you thousands of dollars in interest in the long run. The table below shows how much interest is paid (over the whole amortization period) on a $100,000 mortgage at an interest rate of 7%.

You can reduce the amount of interest you pay by reducing your amortization by increasing the frequency of your payments, paying additional amounts on your payment dates, increasing the amount of your payments, making lump sum payments or by selecting a shorter amortization at renewal time. 


The amortization of a mortgage is made up of smaller time periods called ‘terms’. A term can be anywhere from 3 months to 25 years. The term is the period of time that you will pay a set interest rate. At the end of the term, you will renew your mortgage for a new term at the prevailing rates of interest.

Generally speaking, the longer the term, the higher the interest rate will be. For example, a 3 year term could be at 6.60%, a 5 year term at 6.75%, and a 10 year term at 7.05%. You are guaranteed that your payments will not change for the length of the term. Let’s use our $100,000 mortgage as an example again: (assuming a 25 year amortization)

As you can see, in this example it is just over $25 per month more to guarantee the interest rate for an extra 7 years! No one can predict interest rates in the future, and many people prefer the security of longer terms