Amortization and term상환 기간과 모기지 기간

How are the two different?

Amortization is the total number of years it takes to bring the principal to zero if you keep paying as planned. In Canada 25 years is a typical choice, and 30 years is possible when you qualify.

The term is the length of your current contract with the lender. During the term your rate, payment and penalty rules are fixed. Terms usually run from 1 to 5 years, and 5 years is a common choice.

So a mortgage with a 25-year amortization and a 5-year term means you sign a new contract (renew) every 5 years while paying it down over 25 years. One amortization holds several terms.

Side by side

How it works in Ontario

The maximum amortization is set by federal regulation. For an insured mortgage (less than 20% down), the Eligible Mortgage Loan Regulations cap it at 25 years. But if any borrower is a first-time home buyer, or the home is newly built (never lived in), it can be up to 30 years.

The regulations say the current rules apply to insurance applications received on or after December 15, 2024. Their “first-time home buyer” is, in short, someone who has never bought a home in Canada, or who did not live in a home owned by them or their spouse this year or in the past four years (full definition below).

For uninsured mortgages (20% or more down), the amortization is set by each lender’s policy, not by law. OSFI’s Guideline B-20 expects federally regulated lenders to set their own maximum and keep the average below it. Some lenders offer 30 years, but the rate may differ, so ask. Note: the federal budget of November 5, 2026 proposes raising the home price limit for “optional mortgage insurance” from $1,000,000 to $1,500,000 and allowing 30-year amortizations, “provided that at least one borrower is a first-time home buyer or the home is newly built” (the budget’s words; it gives no more detail). That is not law yet and has no date. The budget does not define “optional” insurance. Reading it as insurance on loans with 20% or more down (low-ratio insurance) is our interpretation. Today the federal regulations limit low-ratio insured purchase loans to homes under $1,000,000 and 25 years.

No law sets the length of a term. The Bank of Canada notes that most variable-rate mortgages have a 5-year term. Fixed-rate terms also usually run 1 to 5 years, and some lenders sell longer ones.

25 vs 30 years: how much does the payment change?

Here is $600,000 borrowed at 5% (estimates for reference, Canada’s semi-annual compounding, assuming the rate never changes).

30 years costs about $288 less each month, but about $106,000 more in total interest, and the principal shrinks more slowly. Real rates change at each term, so the total interest will differ.

When the term ends: renewal

The Bank of Canada explains that if the mortgage has not been paid in full at the end of the term, it must be renewed. So the rate can change at renewal.

At renewal the remaining amortization normally carries on. For example, after the first 5-year term of a 25-year mortgage, the new payment is calculated over the remaining 20 years. You can renew with the same lender or switch. Since November 21, 2024, moving a stand-alone uninsured mortgage (a regular mortgage, not one combined with a HELOC) from one federally regulated lender to another, with no increase in the loan or the remaining amortization (a “straight switch”), no longer needs OSFI’s set stress-test rate.

Stretching the amortization again at renewal (say, from the remaining 20 years back to 30) needs a new approval, and an insured mortgage cannot go past the regulated cap.

Variable rates and amortization

With a variable-rate mortgage that has fixed payments, a rate rise means more of each payment goes to interest and less to principal, so the real time to pay it off (the effective amortization) becomes longer than the contract says. If rates rise far enough, no principal is paid at all (the trigger rate) or the balance can even grow.

For insured mortgages the regulations require the payment to be recalculated at least once every five years to get back to the original amortization schedule. This usually happens at renewal. See “Fixed vs variable rate”.

How to choose

• Amortization: if the monthly payment is tight, start at 30 years and shorten it later with prepayments. Many contracts allow extra payments up to a set percentage each year without penalty, but the limit differs by contract.
• Term: if you may sell or move within a few years, a shorter term or a portable mortgage can help, because paying out mid-term costs a penalty.
• Nobody can pick a term by predicting rates. Choose based on whether you could handle payments if rates went up.
• To get a 30-year insured mortgage as a first-time buyer or new-build buyer, confirm with the lender in advance that you fit the regulation’s definitions.

Example