A mortgage loan is different than any other loan you will get in your lifetime.
Most mortgage loans are negotiated for a set time period of less than 10 years. They are negotiated for a single interest rate which will remain in place for the entire term of the mortgage loan. (The only exception to this would be a line of credit, in most cases. The interest rate on a line of credit may be changed over time.) Generally, you can pay off a loan in full at any time, although you may pay a penalty depending on the mortgage lender.
Most of us are familiar with this kind of loan through the purchase of our vehicles.
With mortgages, the length of the mortgage, the mortgage interest rate are negotiated separately. In this case:
- the 'amortization' of the mortgage is the length of time it will take to pay off the mortgage
- the term refers to the time period covered by your current mortgage contract. This is normally the length of time that you are 'locked in' to a particular interest rate and payment amount.
- the interest rate can either be fixed or variable.