choosing a term for your mortgage

When deciding on a mortgage plan that is right for you, there are various factors to consider. For example, can you afford to pick a shorter amortization period and pay higher monthly payments but less interest overall? Is a fixed interest rate better for you than a variable interest rate? It can be an overwhelming process, but we’re here to simplify it for you! Continue reading to learn more about the things to consider when choosing a term for your mortgage.

Mortgage term VS Mortgage amortization

The mortgage term is the length of time your mortgage contract is in effect. You will not have to renew your mortgage if you pay off your mortgage balance at the end of the first term. However, it is more common to require multiple terms to repay your mortgage fully. Fortunately, you can choose the duration of your mortgage. They range from a few months to five years or more. The amortization period is the length of time it takes to pay off a mortgage in full. This estimate is based on your interest rate for your current mortgage term. For example, if the down payment on your home is under 20%, the most extended amortization would be 25 years.

Long-Term Mortgages

Long-term mortgages can be both beneficial and risky. The positives of securing a long-term mortgage are lower monthly payments and rising interest rates having little to no effect on your mortgage plan. Unfortunately, a longer-term mortgage means it is more expensive overall because you are paying much more interest. Use a mortgage calculator and plug in shorter amortization periods to compare the increase in payments with the reduction in interest. Often, the sweet spot is approximately 20 years, where the increase in payments isn’t substantial, but the savings in interest costs could pay off.

Short-Term Mortgages

Short-term mortgages can be more beneficial in the long run. Not only are they cheaper overall, but they can help you avoid paying a prepayment penalty fee for breaking your mortgage term early. Of course, short-term mortgages are quicker to pay off because your monthly payments are substantially higher. Plus, if interest rates go up, it will have a significant impact on your payments.


Your mortgage term determines your interest rate and the type of interest for a set period. If you opt for a fixed interest rate, the rate won’t change throughout the duration of your term. In contrast, a variable interest rate can vary during your term, depending on the banks’ rate. Typically, lenders offer different interest rates for various mortgage term lengths. Usually, interest rates increase as the term length increases, but it’s not always the case.

How to Choose Which Mortgage Term is Best For You

Picking the correct mortgage term depends on your financial situation, short-term and long-term goals, and risk tolerance. A longer term can help you lock in a reasonable interest rate for a lengthier period. In contrast, a shorter term can give you more flexibility but provides less protection if interest rates go up shortly. It’s essential to choose the mortgage term that suits your circumstances.

Although it can be challenging, we hope this post has given you a good overview of what you should consider when choosing a term for your mortgage. For more helpful advice about everything home-related, visit the Falconcrest Homes’ blog.

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