Amortization Period: The total time it will take to pay off your entire mortgage (e.g., 25 years). A longer amortization means lower monthly payments but significantly more interest paid over the life of the loan.

Mortgage Term: The length of your current contract with the lender (e.g., 5 years). At the end of the term, you must renew your mortgage at a new interest rate. A single 25-year amortization might consist of five separate 5-year terms.

Fixed-Rate: The interest rate is locked in for the entire term. Your payment amount is predictable and won’t change, protecting you from market fluctuations. This is like paying a small premium for peace of mind.

Variable-Rate: The interest rate fluctuates with the lender’s prime rate (which follows the Bank of Canada’s policy rate). This can be cheaper over the long run but carries the risk that your payments could increase if rates go up.

This applies to variable-rate mortgages with fixed payments. As interest rates rise, more of your fixed payment goes to interest and less to the principal.

The Trigger Rate is the interest rate at which your fixed payment covers only the interest, and none of the principal. If rates rise further, you hit negative amortization: your loan balance actually starts to grow because your payment doesn’t cover all the interest owed. This is a critical point where your lender will require you to increase your payments or make a lump-sum payment.