Amortization is the total number of years it would take to pay off your mortgage if you kept the same rate and payments. It is different from your term, which is the length of your rate contract. The amortization you choose changes both your payment and your total cost.
Payment and interest: an example
These figures are illustrative for a $500,000 mortgage at 5% with monthly payments, using Canadian semi-annual compounding.
| Amortization | Approx. monthly payment | Approx. total interest |
|---|---|---|
| 20 years | $3,285 | $288,500 |
| 25 years | $2,908 | $372,400 |
| 30 years | $2,669 | $460,700 |
Moving from 25 to 30 years lowers the payment by roughly $240 a month but adds roughly $88,000 in interest in this example. Run your own numbers in the mortgage calculator.
Who can use a 30-year amortization
- Uninsured mortgages (20% or more down): many lenders allow up to 30 years, and sometimes longer.
- Insured mortgages: the maximum is generally 25 years, but eligible first-time buyers and buyers of new builds can use 30 years on insured mortgages.
Rules change, so confirm current eligibility with a lender or on government websites.
Pros and cons
| Longer amortization (30 years) | Shorter amortization (25 years or less) | |
|---|---|---|
| Monthly payment | Lower | Higher |
| Qualifying | Can help you qualify for more | May reduce how much you qualify for |
| Total interest | Higher | Lower |
| Equity build-up | Slower | Faster |
A middle path
You can start with a longer amortization for cash flow and pay it down faster with accelerated bi-weekly payments, lump-sum prepayments or larger payments when you can. Check your prepayment privileges so you do not trigger penalties.
Frequently asked questions
Can I change my amortization at renewal?
Often yes. Many lenders let you shorten it at renewal, and some let you extend it, subject to qualification and lender rules.
Does amortization affect my rate?
Sometimes. Some lenders price longer amortizations slightly higher, and insured mortgages may have a premium surcharge for 30 years.
Is a 30-year mortgage a bad idea?
Not necessarily. It can help affordability, but it costs more interest. Many buyers choose it and then pay extra when they can.
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