What Mortgage Terms Work Best for You?

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Not to be confused with amortization, a mortgage term is the length of time you are committed to a certain mortgage rate and conditions set out by your lender. In Canada, these can last as little as 6 months all the way to 10 years. Regardless of length, once the mortgage term is up the homeowner must renew their mortgage to keep working towards paying off the principal amount of the loan. While most Canadian homeowners choose a mortgage term of 5 years, that doesn’t mean it’s a one-size-fits-all option. Here are some considerations to make when determining the length of your next mortgage term. 


Short mortgage terms can be a few months to a couple of years. This allows the homeowner to renegotiate their loan much sooner without risking extra fees. There are a few reasons why this could be beneficial:

  • You expect interest rates to go down within a relatively short period of time.
  • You are planning on moving to a new home soon.

However, be wary that if interest rates do go up, you may be left to renegotiate your mortgage at a higher interest rate. 


On the flip side, a longer mortgage term allows homeowners to lock in a great interest rate over a longer period of time. This is useful in cases where:

  • You appreciate the certainty and security of knowing what your mortgage payments will be in the long term. 
  • You expect rates to increase in the next little while.

When choosing a longer term, be aware that you may have to pay a prepayment penalty in order to make any changes to your mortgage contract.  

The Best of Both Worlds

In some cases, homeowners can extend their short-term mortgage. This is known as a convertible mortgage. When this happens, the interest rate will change to whatever the lender is offering for the longer term. Discuss this option with your lender if you think your circumstances may change and you may want to extend your term. 
Like many mortgage features, terms should be chosen based on your individual situation. If you’re curious about even more ways to tailor your mortgage agreement, contact the experts at Source Mortgage today. 

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