It is important to understand the difference between amortization period and term. Amortization is the length of time it will take you to repay your entire mortgage.  Term is the length of time you and your lender are committed to a specific interest rate and loan amount.

There are many factors, either in the financial markets or in your own life, which you need to consider when you select your mortgage amortization period and term length.

The longer your amortization period the smaller your payments will be but the total amount of interest you pay will be higher.  Striking the perfect balance between minimizing your interest costs and having enough financial cushion is difficult but a licenced mortgage professional can help.

Opting for a long amortization and/or locking in your interest rate for a longer term are ways to keep your payment affordable over time.  If you can afford larger payments or would’t be significantly impacted by rising mortgage payments, having a shorter amortization period or variable interest rate could save you thousands of dollars on interest.

If you are shopping for a mortgage for an investment property, you will likely want to consider choosing a longer mortgage term. This will allow you to know that the mortgage payments on the property will be steady for a long time and allow you to more accurately project your future income from the property.

Choosing the right amortization period and mortgage term is a unique decision for each individual. By understanding your personal financial situation and your tolerance for risk, a mortgage professional can assist you in making the right decision.