When you arrange a mortgage to help you with the buy of a property, you will negotiate the details with your lending institution. Two of the items you will rule on will be term and amortization.
The term of your mortgage will be the distance of time that you will be "locked in" to determined payments at a exact interest rate. For example, if you pick a "5 year ended mortgage term", this means that you will have mortgage payments of a determined amount for 5 years. At the end of 5 years, you will have to either pay the remaining amount owing to your mortgagee*, or renegotiate your mortgage. This distance of time is commonly 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 pick to either renegotiate your mortgage or pay out your mortgage before the end of your term, you may have to pay a penalty, depending on the trade contained in your appropriate payment Terms*.
The amortization of your mortgage is the distance of time that it would take you, at your current payment and interest rate, to pay your mortgage in full. This amount of time is commonly 20 or 25 years, when you first arrange your mortgage. As you enlarge straight 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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