What is Amortization in Canadian mortgages?
Total time to pay off the mortgage in full. Longer amortization = lower monthly payments but more interest paid.
Why Amortization matters
Amortization is the main lever for payment size. A longer amortization lowers the payment, which helps GDS and TDS, but it raises the total interest paid over the life of the mortgage.
What is the Amortization limit for Canadian mortgages?
Insured: 25 years, or 30 years for first-time buyers and new builds. Uninsured: commonly up to 30 years
Amortization example
Worked example
25-year amortization on $500,000 at 5% = $2,908/month vs 30-year = $2,668/month.
How brokers use Amortization
- Since December 15, 2024, first-time buyers and buyers of new builds can use a 30-year amortization on an insured mortgage. Other insured borrowers are limited to 25 years.
- Uninsured mortgages commonly go to 30 years, and some lenders go longer on specific products.
- Amortization is different from the term. A 25-year amortization with a 5-year term means the mortgage is renewed several times before it is paid off.
- A longer amortization on an insured mortgage adds 0.20% to the CMHC premium.
More questions about Amortization
What is the difference between amortization and term?
Amortization is the total time to pay off the mortgage. The term is how long the current rate and conditions last, commonly 1 to 5 years, after which you renew.
What is the maximum amortization in Canada?
For insured mortgages it is 25 years, or 30 years for first-time buyers and new builds. For uninsured mortgages it is commonly 30 years, with some lenders offering more.