Term and amortization are different
The term is the period during which the current mortgage contract remains in force.
The amortization is the estimated period required to repay the mortgage in full based on the current balance, rate and payment structure.
A borrower may have:
A five-year term
A 25-year amortization
At the end of five years, the mortgage has not been fully repaid. The remaining balance must normally be renewed, refinanced, transferred or discharged.
FCAC confirms that terms may range from a few months to five years or longer, while amortization extends across the estimated repayment period.
How the major product features interact
| Feature | What it controls | Main borrower consideration |
|---|---|---|
| Term | How long the current rate and contractual conditions apply | Renewal timing, rate certainty and break risk |
| Amortization | Estimated time to repay the balance | Payment size and total interest |
| Open mortgage | Ability to repay without an ordinary prepayment penalty | Usually greater flexibility at a higher rate |
| Closed mortgage | Limits repayment beyond contractual privileges | Usually lower pricing but potential break penalties |
| Convertible term | Permits conversion from a shorter term to a longer term under lender rules | Conversion rate and available terms are lender-specific |
| Standard charge | Secures the mortgage amount under the registered charge | May be easier to transfer in some circumstances |
| Collateral charge | Can secure the mortgage and other obligations, potentially above the initial advance | Future borrowing flexibility but possible transfer or legal complexity |
| Portable mortgage | May allow the existing mortgage to move to another property | Requalification, timing and property approval still apply |
| Assumable mortgage | May allow an approved buyer to assume the existing contract | Lender approval and seller-liability issues require review |
| Interest-only structure | Payment covers interest without scheduled principal reduction | Balance normally remains outstanding and requires a clear exit |
Open and closed structures, portability, assumability and standard versus collateral charges are contract features rather than universal rights. FCAC advises borrowers to verify the restrictions directly in the mortgage agreement.
Choosing a term
A shorter term provides an earlier opportunity to renegotiate but exposes the borrower to renewal risk sooner.
A longer term provides rate certainty for longer but may:
Carry different pricing
Reduce flexibility
Create a larger penalty if the mortgage is broken
Extend the period before the borrower can renegotiate without a break charge
The correct term should reflect the expected holding period—not merely a rate forecast.
A borrower likely to sell in two years should not assess a five-year mortgage as though the only relevant question were the first payment.
Amortization and total cost
A longer amortization generally:
Lowers the scheduled payment
Slows principal repayment
Increases total interest if other assumptions remain unchanged
A shorter amortization generally does the opposite.
FCAC’s current guidance warns that extending amortization to lower payments can add thousands or tens of thousands of dollars in interest.
The maximum available amortization depends on the transaction, mortgage-insurance rules and lender policy. The insured limits are addressed in Chapter 12.
Payment frequencies
Common payment frequencies include:
Monthly
Semi-monthly
Standard biweekly
Standard weekly
Accelerated biweekly
Accelerated weekly
A standard biweekly schedule divides the annual equivalent of 12 monthly payments across 26 payments. An accelerated biweekly schedule generally pays half the monthly amount every two weeks, producing the equivalent of approximately one additional monthly payment each year.
Accelerated biweekly payments
Assumptions
Mortgage principal: $500,000
Interest rate: 4.50%
Amortization: 25 years
Monthly payment: $2,767.36
Rate remains unchanged solely for illustration
No prepayments other than the accelerated schedule
Figures rounded
Variables
M = Monthly payment
SB = Standard biweekly payment
AB = Accelerated biweekly payment
Formulas
Standard biweekly payment = Monthly payment × 12 ÷ 26
Accelerated biweekly payment = Monthly payment ÷ 2
Calculations
SB = $2,767.36 × 12 ÷ 26
SB = $1,277.24
AB = $2,767.36 ÷ 2
AB = $1,383.68
Annual payments
Standard monthly or standard biweekly:
$2,767.36 × 12 = $33,208.32 per year
Accelerated biweekly:
$1,383.68 × 26 = $35,975.68 per year
Additional annual principal-and-interest payments:
$35,975.68 − $33,208.32 = $2,767.36
Result
Under the stated constant-rate assumptions:
Standard schedule balance after five years: approximately $438,796
Accelerated-biweekly balance after five years: approximately $423,313
Additional principal reduction: approximately $15,483
Approximate repayment period under the accelerated schedule: 21.7 years instead of 25 years
Interpretation
The benefit does not come from paying every two weeks by itself. It comes from paying more money each year.
Actual results will change when the mortgage renews at a different rate.
Prepayment features
A mortgage may permit the borrower to:
Increase regular payments
Make annual lump-sum payments
Double payments
Apply proceeds at specified times
The percentage, timing and unused-privilege rules vary by lender. These features matter only if the borrower is realistically likely to use them.
A 20% annual privilege offers little practical value to a borrower who cannot make additional payments. Conversely, a borrower expecting a business distribution, inheritance or property sale should compare these provisions carefully.
Portability, assumability and blend-and-extend
Portability
Portability may allow the borrower to move the existing balance, rate and remaining term to a new property.
It remains subject to:
Borrower requalification
New-property approval
Closing-date coordination
Additional-funds pricing
Product restrictions
Assumability
An assumable mortgage may allow another approved borrower to take over the contract. The legal consequences, including any continuing liability of the original borrower, should be reviewed with a lawyer.
Blend-and-extend
A lender may permit the existing rate to be blended with the rate on additional money or a new term. Calculation methods and eligibility are lender-specific.
These features should be treated as conditional options, not guaranteed escape routes.