WHAT IS A MORTGAGE TERM?
The term of a mortgage is the duration for which the mortgage contract will be in effect between the lender and borrower. By the end of the mortgage term, the principal amount of the mortgage must be paid back in full, or the mortgage must be renewed with the same lender. Typically, borrowers will sell or refinance the property to pay back the lender on or before the end of the term. The most typical institutional mortgage term we see in our practice is five years. Private mortgages generally have shorter terms, with the most common term we see being one year. A borrower may incur a prepayment penalty if they make larger monthly payments than set out in the mortgage contract, or if they try to pay the outstanding balance of the mortgage before their mortgage term expires. It is important that you plan for the end of the term of your mortgage in advance and be aware of any prepayment penalties that may be payable if you pay back the mortgage earlier than the end of the term. To find out more information about your prepayment penalty, you may refer to the original loan agreement between you and the lender.
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Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.