Mortgage Amortization in Canada — 25 vs 30 Years Explained

What is Amortization?

Amortization is the total time to pay off your mortgage. It's different from your term (how long your current rate is locked in). Most Canadians have a 25-year amortization but sign 5-year terms at a time, renewing multiple times over the life of the mortgage.

25-Year vs 30-Year: The Numbers

Factor	25 Years	30 Years
Monthly payment ($500K at 4.89%)	$2,855	$2,635
Monthly savings	—	$220/mo
Total interest paid	$356,500	$448,600
Extra interest cost	—	+$92,100

Who Qualifies for 30-Year Amortization in Canada?

As of 2024–2026, 30-year amortization with less than 20% down (insured mortgage) is available to:

• First-time home buyers purchasing a newly built home

All other buyers with less than 20% down are limited to 25 years. Buyers with 20%+ down (conventional mortgage) can choose up to 30 years with most lenders regardless of buyer status.

When Does a Longer Amortization Make Sense?

• You're at the top of your budget and need lower payments to qualify
• You plan to make prepayments anyway — many mortgages allow 10–20% extra per year
• You're a first-time buyer who expects income to grow significantly

The Prepayment Strategy

Choose 30 years for lower mandatory payments, but make extra payments when you can. This gives you flexibility — you're not locked into the higher 25-year payment, but you can still pay off faster when cash allows.

25 vs 30 Year — The Numbers on $400,000 at 4.89%

25-year payment: $2,285 · 30-year payment: $2,102 · Monthly saving: $183 · Extra total interest (30yr): $71,220 · Extra balance owing after 5 years (30yr): $13,900. The 30-year saves monthly cash flow but costs significantly more in total interest.

When 30 Years Makes Sense

• At maximum affordability and need lower payment to pass the stress test
• First-time buyers of new builds — 30-year insured amortizations now available
• You have higher-return investment opportunities for the monthly savings

Accelerated Payment Strategies

• Accelerated bi-weekly: 26 payments/year = equivalent of 13 monthly payments. Shortens 25-year amortization by 2–3 years at no additional cost
• Annual lump sum: 10–20% of original principal allowed annually penalty-free. Even $5,000–$10,000/year dramatically reduces amortization

⚠️ This article is for informational purposes only. Not financial advice. Canada Mortgage Rates is not a licensed mortgage broker. Always verify with a licensed professional.