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Mortgage Amortization in Canada

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

Mortgage amortization table

The mortgage amortization is the period of time over which the 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 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.). Mortgage Amortization Table | Mortgage Amortization In Canada

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. The table below is taken from the Canadian Association of Accredited Mortgage Professionals (CAAMP) 2010 report and shows the breakdown of amortization periods:

The breakdown of amortization periods

Amortization period Purchase Renewal All mortgages
Up to 25 years 58% 86% 78%
30 years 12% 6% 8%
35 years 30% 5% 8%
40 years 0% 3% 6%

What is the most popular amortization period?

The table shows that amortization periods up to 25 years are the most popular with borrowers. Longer mortgage amortization periods (>25 years) tend to be popular on mortgages for new purchases, however, this percentage should go down given the reduction in the mortgage amortization period for CMHC insured mortgages to a maximum of 25 years in July 2012.

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 make income
  • You’re a first time homebuyer without a good grasp of the costs of home ownership

When to choose a shorter mortgage amortization period:

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