Mortgage Term vs Amortization

TermVsAmortization.jpgDo you know the difference between the term of the mortgage and its amortization? If you're a first time home buyer, you might have heard both words used without explanation – sometimes interchangeably – and even an experienced homeowner can confuse the two. Understanding some of the basic words and phrases that your mortgage broker uses on a daily basis can help you feel more comfortable and informed during the mortgage process.


The term of your mortgage is the length of time in your current contract with a lender. The average mortgage term in Canada is 5 years, but you can have a term as short as 1 year or as long as 10 years. You know what your interest rate is going to be throughout the term, either fixed or variable depending on what you decided when you entered into the agreement.

At the end of your mortgage term, you can either

  • Repay the balance of the principal owing on the loan, OR
  • Renew your mortgage according to the rates and conditions at that time – either with the same lender, or with a new lender if it's a better fit for your situation.


The amortization of your mortgage is the number of years it will take to repay the entire amount of the loan. In Canada, the common amortization periods are 25 years for an insured mortgage, or 30 years for an uninsured mortgage. Depending on when you bought your home, you may have even started with a 35 or 40 year amortization.

The reason we talk about amortization (you'll often hear it called "am" in conversations) is because it would be crazy to think about repaying your entire mortgage during the term. Just imagine paying $300,000 in only 5 years!

Your mortgage broker will also provide you with an amortization schedule once your deal is finalized. This timetable will show you the amount of each payment applied to interest and principal, as well as the remaining balance of the loan after each payment is made.

Final Thoughts

We believe that you should understand your mortgage details; after all, your home is the largest purchase you're likely to ever make, and your mortgage is a significant part of your financial picture. Are you ready to start your mortgage with a professional team who will take the time to explain the process to you? Set up a free consultation with one of our planners today: call us toll-free at 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours. We can also arrange an appointment evenings or weekends to work with you.


Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.