Introduction

When securing a home loan in Canada, one of the most critical decisions is selecting your amortization period—the total number of years it will take to pay off your mortgage in full.

In Canada, the two most common amortization periods are 25 years and 30 years.

While a 30-year amortization offers lower monthly payments, it results in paying significantly more interest over the life of the loan. In this guide, we compare both options to help you choose the best fit for your budget. You can calculate your payments with our Mortgage & Stress Test Calculator.

25-Year Amortization (The Standard)

A 25-year period is the maximum allowed amortization in Canada for insured mortgages (loans with a down payment of less than 20% that require CMHC default insurance).

Pros:

• Lower Interest Costs: Because you pay off the principal faster, you save tens of thousands of dollars in interest fees over the life of your mortgage.
• Build Equity Faster: You own your home fully 5 years sooner.

Cons:

• Higher Monthly Payments: Your monthly obligations are higher, which can stretch your household budget.

30-Year Amortization

A 30-year amortization is only available for uninsured mortgages (loans with a down payment of 20% or more).

Pros:

• Improved Affordability: Lower monthly payments make it easier to manage cash flow.
• Higher Borrowing Power: Lower monthly payments help you pass the GDS/TDS debt ratio tests, potentially qualifying you for a larger loan.

Cons:

• Higher Lifetime Interest: You pay interest for an extra 5 years, which increases the total cost of your home.

Comparison Example ($500,000 Mortgage at 5% Interest)

Note: Choosing the 30-year option saves you ~$240 per month, but costs you over$88,000 in additional interest!

Conclusion

If cash flow is tight or you need to qualify for a larger purchase price, the 30-year option can be helpful. However, if you can afford the higher payments, choosing a 25-year amortization is the smart financial choice.

To calculate your exact payment schedules and interest savings, use the Mortgage & Stress Test Calculator.