When you arrange a mortgage to help you with the purchase of a property, you will negotiate the details with your lending institution. Two of the items you will decree on will be term and amortization.
The term of your mortgage will be the length of time that you will be "locked in" to unavoidable payments at a definite interest rate. For example, if you select a "5 year ended mortgage term", this means that you will have mortgage payments of a unavoidable estimate for 5 years. At the end of 5 years, you will have to whether pay the remaining estimate owing to your mortgagee*, or renegotiate your mortgage. This length of time is normally in the middle of 6 months and 5 years, although there are some lending institutions that will offer mortgage terms of 7 or 10 years.
Mortgages: What is the difference between Term and Amortization
If you select to whether renegotiate your mortgage or pay out your mortgage before the end of your term, you may have to pay a penalty, depending on the deal contained in your thorough fee Terms*.
The amortization of your mortgage is the length of time that it would take you, at your current cost and interest rate, to pay your mortgage in full. This estimate of time is normally 20 or 25 years, when you first arrange your mortgage. As you develop through the years of payments on your mortgage, if you keep your payments similar, the amortization of your mortgage will decrease.
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