Amortization

This is the length of time it would take to pay off the mortgage - assuming that the interest rate never changed, all payments were made on time and no additional payments were made.

In Canada 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.

You can also reduce your amortization (and therefore the amount of interest you pay) by doing any of the following:

Term

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.

In general, the longer the term, the higher the interest rate will be. You are guaranteed that your payments will not change for the length of the term.