You’re looking at a mortgage offer that says “three-year term” and “25-year amortization.” It’s reasonable to wonder: which one tells you when the mortgage is finished?
The 25-year amortization is the estimated repayment schedule. The three-year term tells you how long this particular mortgage contract lasts. When those three years end, you will usually still have a balance to deal with. FCAC explains the two periods here.
When comparing offers, put both numbers beside the interest rate. They answer different questions about your budget and your next mortgage decision.
What happens after the three-year term?
You do not normally have to clear a 25-year repayment schedule within three years. At the end of the term, you need to pay the remaining balance or arrange the next term. That may involve renewing with your lender or arranging a switch, subject to the requirements that apply.
Use that point to review more than the new rate. Does the payment fit your household budget? Are you planning to move? Has your income changed? FCAC recommends reviewing your mortgage needs and comparing options before renewal. Read FCAC’s renewal guidance.
Let’s walk through an example
Why a lower payment needs a closer look
For the same loan and interest rate, spreading repayment over more years generally reduces the regular payment but increases total interest if you follow that longer schedule. FCAC illustrates this trade-off.
From a broker’s perspective, compare what the payment leaves in your budget with how quickly the balance comes down. Ask for the balance projected at the end of each proposed term. That gives you another way to compare offers beyond the payment on the first month’s statement.
What if you want to pay extra or move earlier?
Check your prepayment privileges before sending a lump sum. Depending on your contract, paying more than the permitted amount or ending the mortgage early can trigger a penalty. An open mortgage and a closed mortgage may give you different flexibility. FCAC explains prepayment privileges and penalties.
If a move is possible during the term, ask for an explanation of early-exit costs and any portability conditions before you sign. A feature called “portable” still needs its conditions checked against your plans.
What to bring to a mortgage conversation
Have your current balance, payment, term-end date and remaining amortization available. Then explain what you expect to change: a move, a different income, extra repayments or a tighter budget.
If the two time periods on your offer are still unclear, visit SimplifyMortgage.ca to contact Rajiv. We can discuss what the proposed schedule means for your plans before you decide. This link takes you to Rajiv’s business website.