Contract Duration (Term)

The contract duration, also referred to as the “term”, is the number of months that you and the lender have agreed to with a specific interest rate and loan repayment schedule. At the end of the term,the contract ends or “matures” and you are given an option to commit for another period of time or “renew”.


There are open contracts and closed contracts. Open contracts can be repaid any time with no penalties but charge a higher interest rate and closed contract have limitations on early repayment. Whether you have a fixed rate or a floating rate, you will be agreeing to a contract duration with the lender. Keep in mind that some contracts are more flexible than others and usually more flexible contracts carry higher borrowing costs.

Since there are penalties for breaking the contract, if you believe you may need to move in the next 3 to 5 years then negotiate a contract that is shorter.

Key Facts:

  • You can lock in a fixed interest rate for up to 10 years.

  • If a mortgage is “closed” over the timeframe, then paying it off early will trigger a penalty.

  • If you want to extend the contract timeframe before the mortgage comes up for renewal, most lenders will let you extend the contract early and take a blend of the existing contract rate and the current available rate. Some charge a fee for early renewal.


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