Two numbers describe a Canadian mortgage, and they are often mixed up. The term is how long your current contract lasts. The amortization is how long it takes to pay off the whole loan.
Mortgage term
The term is the time your mortgage contract is in effect. At the end of each term you pay off the mortgage, renew it, or move it to another lender. A term is often a few years, even when the amortization is 25 or 30 years.
Amortization period
The amortization is the time it takes to pay the mortgage in full, based on the current rate. Your lender estimates it, and it can change if the rate changes during the term.
A longer amortization lowers the payment
Stretching the amortization lowers each regular payment, but you pay more interest over the life of the loan. The Financial Consumer Agency of Canada (FCAC) example below uses a $300,000 mortgage at 4%.
| Amortization | Monthly payment | Total interest |
|---|---|---|
| 10 years | $3,033 | $63,919 |
| 15 years | $2,214 | $98,541 |
| 20 years | $1,813 | $135,057 |
| 25 years | $1,578 | $173,418 |
Maximum amortization
If your down payment is under 20%, the maximum amortization is 30 years for first-time buyers and for new builds, and 25 years in all other cases. If your down payment is 20% or more, the lender sets the maximum.
Use the term and amortization together
Choose the term for the rate and renewal timing you want, and choose the amortization for the payment you can afford over the long run. Try different amortizations in the Canadian mortgage calculator to see the payment and total interest side by side.
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Official source
FCAC · Mortgage terms and amortization
This guide explains general rules. Confirm your figures with your lender, lawyer, or the official source before you act.