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Mortgage Amortization in Canada

Your guide to choosing a long vs. short mortgage amortization period.

What is a mortgage amortization?

The mortgage amortization is the period of time over which ta mortgage will be paid off. The maximum mortgage amortization period is 25 years for CMHC insured mortgages and 35 years for non-CMHC insured mortgages. A CMHC mortgage is generally one where the home purchaser has a down payment of less than 20% of the purchase price. The standard amortization period is normally 25 years, however, a borrower may choose any period as long as it’s within the limit (i.e. 7 years, 22 years, etc.) and according to the lender's mortgage product restrictions.

The mortgage amortization period assumes that the mortgage rate and payments remain constant over the life of the mortgage. In actuality, a mortgage will have to be renewed several times over its life, likely at different rates. Furthermore, payment frequency and amount could change depending on a change in your financial position. All these factors would adjust the amortization period.

The longer the mortgage amortization period is, the smaller the mortgage payments, given that the payoff of the mortgage is spread over a longer period of time. However, a longer amortization period will also result in more interest paid over the life of the mortgage compared to a shorter amortization period since less of the principal will be paid off with each payment.

Tips for choosing your amortization period

Is a longer or shorter amortization period right for you?

When to choose a longer mortgage amortization period:

  • A mortgage becomes unaffordable with a shorter mortgage amortization period
  • You are worried about your job stability or future ability to earn income
  • You’re a first-time homebuyer without a good grasp of the costs of homeownership

When to choose a shorter mortgage amortization period:

  • You want to pay off your mortgage faster
  • You have stable and predictable income
  • You lack financial discipline – if you have extra money it will be spent instead of applied to your mortgage
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