Can I Get a 30-Year Mortgage in Canada?
When you hear about a 25-year or 30-year mortgage in Canada, it refers to the amortization period. The amortization period is the length of time required to pay off the mortgage balance in full through regular payments. It is not the same as your mortgage term, which is the much shorter contract period covering your rate and conditions.
While the most common mortgage amortization in Canada is 25 years, many borrowers prefer longer amortizations, especially in our current high-interest-rate environment. We’ll break down what a 30-year mortgage is, how to get one, and why it’s inaccessible to many homebuyers.
Key Takeaways
- 30-year mortgages refer to the amortization, or the length of time it takes to pay off the mortgage balance in full.
- 30-year amortizations can help increase your purchasing power.
- 30-year mortgages may lower monthly payments. However, they come at the cost of higher interest over the life of the loan.
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Can I Get a 30-Year Mortgage in Canada?
While you can get a 30-year mortgage in Canada, most mortgages feature a 25-year amortization period. This is primarily because CMHC insures a maximum 25-year amortization for most borrowers, with a carve-out for first-time buyers and those purchasing a newly built home.
Changes to regulations for insured mortgages, which took effect on December 15, 2024, allow first-time buyers and those purchasing a newly built home to qualify for 30-year amortized default-insured mortgages. Essentially, it’s not that you can’t get a 30-year mortgage; it’s just much harder to do so without a larger 20% down payment, purchasing a new build, or qualifying as a first-time buyer.
What Is the Longest Mortgage Amortization You Can Get in Canada?
Currently, a typical mortgage has a 25-year amortization period, but there were once insured mortgages with up to a 40-year amortization. However, the federal government scrapped this in 2008, when mortgage regulations were tightened, and the amortization available for default insurance was reduced to 35 years. In 2011, that same amortization period was reduced to 30 years; in 2012, it was reduced again to 25 years.
The maximum amortization period for insured mortgages is 25 years for most borrowers, so this option is usually the most popular. Since December 15, 2024, all first-time buyers and those purchasing a newly built home can choose a 30-year amortization on insured mortgages.
There is no set maximum mortgage amortization period for uninsured mortgages. Subprime lenders offer mortgages with amortization periods longer than 30 years. However, those who opt for uninsured mortgages can select a 30-year amortization from prime lenders if they choose not to take the 25-year option.
Pros & Cons of a 30-Year Uninsured Mortgage in Canada
| Pros | Cons |
|---|---|
| More purchasing power | Higher interest rates |
| Smaller mortgage payments | Slow equity growth |
| Added flexibility | Higher interest-carrying costs |
| No mortgage default insurance premiums | Requires a 20% or more down payment |
Pros of 30-Year Uninsured Mortgages
If you’re considering a 30-year uninsured mortgage, it’s important to weigh the pros and cons. Here’s why some homebuyers prefer to opt for a 30-year uninsured amortization.
More Purchasing Power
With a 30-year mortgage, your borrowing power increases, allowing you to shop for more expensive homes. One key factor lenders consider when evaluating a mortgage application is your debt service ratio. Spreading your mortgage payments over 30 years, rather than 25, lowers your monthly payments, makes qualifying easier, and increases your purchasing power.
Smaller Mortgage Payments
Since your mortgage payments are spread over 5 more years, your monthly payments will be lower, leaving you with extra funds each month. These extra funds can be saved for emergencies or invested, providing greater peace of mind.
Added Flexibility
Given that CMHC does not insure 30-year mortgages for everyone, this grants certain freedoms. One is the freedom to purchase homes over $1.5 million, subject to the lender’s limits and the property’s location. Another perk of 30-year amortizations is the possibility of porting your mortgage to a new home over $1.5 million, although you’ll only be able to port your remaining balance and amortization.
For instance, assume that you own a condo presently worth $700,000. You could port this mortgage to a new home valued at $1,700,000, which isn’t possible with an insured mortgage. With an insured mortgage, you would likely need to break your current mortgage, pay a prepayment penalty and potentially lose a lower interest rate.
Easily Increase Payments
Since choosing a 30-year mortgage may result in a lower mortgage payment, you can utilize any prepayment privileges that allow you to make extra payments and pay off your mortgage within a shorter time frame without any penalties.
In other words, you could pay off the mortgage in less than 30 years, accelerating your repayment schedule and reducing your total interest costs. This allows you to put any windfall gains or income increases to good use. You can shorten the amortization at any time by making additional or lump-sum payments, within your annual prepayment limits.
Once you’ve built up at least 35% equity in your home, you could take advantage of lower insurable rates with a renewal into a 25-year or less amortization. Though higher than insured rates, insurable rates are comparable and typically much lower than uninsured ones. Insurable rates allow lenders to purchase low-ratio bulk portfolio insurance from CMHC to protect themselves from mortgage default risk. Portfolio insurance lowers mortgage renewal rates, allowing borrowers to switch lenders more easily.
Cons of 30-Year Uninsured Mortgages
If you’re considering a 30-year uninsured mortgage, it’s important to ensure the drawbacks (cons) don’t outweigh the pros. Here’s why some homebuyers may not want to opt for a 30-year uninsured amortization.
Higher Interest Rates
30-year amortizations typically have higher interest rates, so not only will you be paying a higher rate, but you’ll also be doing so over a longer duration, compounding the total interest you will pay over the life of the mortgage.
Default-insured mortgages have the lowest interest rates because the added insurance protects the lender in the event of default. Lenders offer the lowest rates because of the lower risk, encouraging borrowers to choose this option. Uninsured mortgages are riskier for lenders, so they will price this risk into the mortgage rate they offer you to offset it as part of their funding costs.
Slow Equity Growth
When choosing a 30-year amortization, it’s important to understand that it will take longer to pay off your mortgage and that you’ll pay more interest over time. The home’s price may not increase as quickly as your remaining mortgage balance declines over the same period. Although you’re building equity by paying down your mortgage, it may not align with increasing home prices. At any given time, home prices typically move in the opposite direction from mortgage rates.
Higher Interest-Carrying Costs
A 30-year amortization on your mortgage allows for lower monthly or bi-weekly payments because the payments are spread over a longer period. However, this means you will continue paying interest for the additional 5 years. These additional years mean you will ultimately pay more in interest-carrying costs over the life of the mortgage. More importantly, you would still incur these extra costs even if your interest rate were the same as that of a 25-year mortgage.
Requires a 20% or More Down payment
Mortgages with 30-year amortization typically require a 20% or more down payment, which takes longer to save than the minimum 5% down payment required for a 25-year mortgage. Saving 20% of the purchase price versus 5% can significantly delay homeownership goals and may affect borrowers’ qualifying amounts if regulations (such as stress tests) or home prices (increasing) become more restrictive.
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Pros & Cons of a 30-Year Insured Mortgage in Canada
| Pros | Cons |
|---|---|
| More purchasing power | Slow equity growth |
| Smaller mortgage payments | Higher interest-carrying costs |
| Smaller down payment requirement | Requires mortgage default insurance premiums |
| Must be a first-time buyer or purchasing a new build |
Pros of 30-Year Insured Mortgages
If you are a first-time buyer or purchasing a new build and considering a 30-year insured mortgage, weigh the benefits and drawbacks (pros and cons) to understand how opting for a longer amortization can impact your finances. Here’s why you may prefer to opt for a 30-year insured amortization.
More Purchasing Power
As with 30-year uninsured mortgages, a 30-year insured mortgage will give you more borrowing power, allowing you to shop for more expensive homes. Lenders assess your debt service ratios when qualifying you for a mortgage, and extending the amortization by an extra 5 years can make it easier to qualify for a larger home.
Smaller Mortgage Payments
Since your mortgage payments are spread over an additional 5 years, this reduces the amount due with each monthly payment. The extra funds you save by lowering your mortgage payment can be used for emergencies or invested, giving you peace of mind.
Smaller Down Payment Requirement
Insured mortgages require a minimum 5% down payment on the first $500,000 of the mortgage balance, allowing you to purchase a home with a lower down payment than uninsured mortgages.
For example, if you are a first-time buyer looking to purchase a $600,000 home and want a 30-year amortization, you would need a 20% down payment, or $120,000, for an uninsured mortgage. Choosing a 30-year insured amortization lowers the down payment required to $35,000 (5% of the first $500,000 and 10% of the remaining $100,000).
Cons of 30-Year Insured Mortgages
If you’re a first-time buyer or purchasing a newly built home and are considering a 30-year insured mortgage, it’s important to ensure the drawbacks (cons) don’t outweigh the benefits (pros). Here are some reasons you may not want to choose a 30-year amortization with default insurance.
Slow Equity Growth
30-year amortizations will take longer to pay off and increase the total interest you pay over time. If the value of your home doesn’t increase as quickly as your remaining mortgage balance reduces, it will take longer to build equity in your home.
Higher Interest-Carrying Costs
A 30-year amortization will lower your mortgage payments since the payments are spread out over an additional 5 years compared to a 25-year amortization. However, this also means you will pay interest for the additional 5 years it takes to pay off your mortgage, increasing your interest costs.
Requires Mortgage Default Insurance Premiums
All insured mortgages require you to pay a default insurance premium. Mortgage default insurance protects the lender against default when borrowers make a down payment of less than 20%.
Premiums are based on the loan-to-value (LTV) ratio and can be paid as a lump sum or added to your mortgage and included in your monthly payments. Adding the premium to your mortgage payments will increase your mortgage balance, increasing the total interest you will pay. All mortgage default insurers alike charge a 20 bps (0.20%) premium for insuring mortgages with amortization periods exceeding 25 years.
Must Be a First-Time Buyer or Purchasing a New Build
Insured 30-year amortizations are available only to first-time homebuyers (FTHB) and to those purchasing a new build. This limits the number of eligible borrowers who can benefit from the qualifying criteria, interest rates, and down payment requirements for a 30-year insured amortization.
Canadian 30-Year Mortgages: High-Ratio vs Low-Ratio Mortgages
A high-ratio mortgage refers to a mortgage where the down payment is less than 20% of the purchase price. Meanwhile, low-ratio mortgages, more commonly known as conventional mortgages, require a down payment of 20% or more.
- High-ratio mortgages require mortgage default insurance, otherwise known as CMHC insurance. In addition to the mandatory insurance costs, this loan type typically has a maximum amortization period of 25 years. First-time buyers and those purchasing a new build can opt for 30-year insured mortgages.
- Low-ratio mortgages may not directly require the borrower to pay for default insurance, so you will save money by not adding this additional expense. With prime lenders, low-ratio mortgages can also have an amortization period of up to 30 years for all eligible borrowers. This is regardless of whether they are first-time buyers or purchasing a new build, as long as they have the required 20% down payment or similar equity built up in the property being mortgaged at renewal and meet all other eligibility criteria.
Am I Eligible for a 30-Year Mortgage in Canada?
The mandatory minimum is a 20% down payment for 30-year amortizations or 5% if you’re a first-time buyer or purchasing a new build and opting for a 30-year insured amortization. Eligibility is determined by the same key factors for any other mortgage, including a potential borrower’s credit score, income, and debt service ratios. Lending institutions thoroughly assess these factors to evaluate the risk associated with granting a mortgage loan to the applicant.
Your credit score plays a pivotal role in determining your eligibility for a mortgage. Alongside credit history, which serves as an indicator of the borrower’s debt repayment habits and financial discipline.
Income is another significant factor affecting eligibility. Lenders need assurance that the borrower has a stable income source that can cover mortgage payments, property taxes, and heating costs over the life of the loan.
Your debt service ratio is the main limiting factor being considered. This ratio measures a person’s total debt obligations in relation to their gross income. A lower ratio indicates that the person has a greater percentage of their income available for mortgage payments. The lender will use up to 35% of your gross debt service (GDS) ratio on an uninsured mortgage and up to 39% if your mortgage is insured. However, if your credit score is below 680, the lender may limit your GDS ratio to 32% of your gross income.
What Is the Best Mortgage Amortization for You?
A longer amortization may not always be the best solution. While it may reduce your monthly payments and free up cash flow, it may also significantly increase the total interest you will pay over the life of the mortgage. It’s important to assess your financial situation, including what you have saved for a down payment. You should also review your short- and long-term goals to determine whether an extended amortization schedule helps you meet your homeownership goals.
Comparing 30-Year Mortgage vs. 20-Year Mortgage in Canada
Here’s a comparison between a 20-year and 30-year mortgage on a 5-year fixed rate for an $800,000 property. Both uninsured columns use nesto’s best 5-year fixed uninsured rate, since a 30-year amortization must be uninsured, which isolates the cost of the longer repayment schedule.
| 20-year insured mortgage (CMHC insured) | 20-year uninsured mortgage (20% down payment) | 30-year uninsured mortgage (20% down payment) | |
|---|---|---|---|
| Minimum Down Payment | $55,000 | $160,000 | $160,000 |
| CMHC Premium | $29,800 | NA | NA |
| Total Mortgage Amount | $774,800 | $640,000 | $640,000 |
| Interest Rate | 4.09% | 4.64% | 4.64% |
| Monthly Payment | $4,718 | $4,082 | $3,279 |
| Total Interest | $357,486 | $339,708 | $540,551 |
| Total Cost (Principal and Interest) | $1,132,286 | $979,708 | $1,180,551 |
Comparing 30-Year Mortgage vs. 25-Year Mortgage in Canada
Here’s a comparison between insured and uninsured 25-year and 30-year mortgages on a 5-year fixed rate for an $800,000 property. The comparisons below show the impact on the total interest you will pay under the changes to insured mortgages if you choose the 30-year amortization instead of 25 years. The insured 30-year columns apply only to first-time buyers or those purchasing a newly built home.
The final column prices the same 30-year uninsured mortgage at the Big 6 Bank average instead of nesto’s rate. The gap looks small on a monthly basis, at roughly $106, but it compounds to about $38,000 in extra interest across a 30-year schedule. Stretching an uninsured mortgage from 25 years to 30 at the same rate adds close to $103,000 in interest, so the amortization decision and the lender’s decision each carry monetary weight.
| 25-year insured mortgage (CMHC insured) | 25-year uninsured mortgage (20% down payment) | 30-year insured mortgage (CMHC insured) | 30-year uninsured mortgage (20% down payment) | 30-year uninsured mortgage at the Big 6 Bank average | |
|---|---|---|---|---|---|
| Minimum Down Payment | $55,000 | $160,000 | $55,000 | $160,000 | $160,000 |
| CMHC Premium | $29,800 | NA | $31,290 | NA | NA |
| Total Mortgage Amount | $774,800 | $640,000 | $776,290 | $640,000 | $640,000 |
| Interest Rate | 4.09% | 4.64% | 4.09% | 4.64% | 4.92% |
| Monthly Payment | $4,113 | $3,592 | $3,731 | $3,279 | $3,385 |
| Total Interest | $459,248 | $437,662 | $566,886 | $540,551 | $578,641 |
| Total Cost (Principal and Interest) | $1,234,048 | $1,077,662 | $1,343,176 | $1,180,551 | $1,218,641 |
How do Interest Rates Differ for 30-year mortgages in Canada?
Generally, mortgages with longer amortization periods carry higher interest rates than those with shorter amortization periods. Depending on the lender, the difference between 25-year and 30-year mortgage rates can be significant.
Insured mortgages are covered by one of Canada’s 3 default insurers: CMHC, Canada Guaranty, or Sagen. These insurers cover the lender’s risk if you default on mortgage payments, allowing lenders to price mortgages with this insurance at lower rates than uninsured mortgages.
For example, nesto’s best 5-year fixed insured mortgage rate is currently 4.24% compared to the uninsured rate of 4.64%. However, nesto is atypical of big bank lenders who collect deposits and savings from their clients and lend them out at much higher rates.
You’ll notice that the typical 5-year average insured rate at big banks currently stands at
Should You Get a 30-Year Mortgage in Canada?
A 30-year mortgage can be a great option to make payments more manageable in today’s high-interest-rate environment. If you meet the requirements to choose 30 years over 25, there are ways you can reduce the additional interest you will pay over the life of the loan.
When you have extra funds, you can shorten your amortization and pay off your mortgage faster by making additional payments or lump sum prepayments. When you come up for renewal, you can also re-evaluate your amortization and opt for an insurable rate.
If your income has increased significantly, you can also adjust your payment amount or frequency. If you can afford higher mortgage payments, you will pay less interest over the life of the loan.
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Frequently Asked Questions (FAQ) About 30-Year Mortgages in Canada
Do 30-year mortgages exist in Canada?
In Canada, a 30-year mortgage refers to the amortization period, or the length of time it takes to pay off the mortgage. Most lenders offer 30-year amortizations if you have the required down payment and meet all eligibility criteria.
How can I get a 30-year mortgage in Canada?
To get a 30-year mortgage, you must have at least a 20% down payment and qualify under the uninsured GDS ratio criteria at 35%. First-time buyers and those purchasing a new build who qualify under insured debt service ratio criteria may be eligible for an insured 30-year mortgage with as little as 5% of the purchase price for a down payment.
What’s the longest amortization period for a mortgage in Canada?
There is technically no maximum amortization period for an uninsured mortgage in Canada. However, with prime lenders, you can only get up to 30 years. Subprime lenders will allow amortizations of 40 years, or even longer for interest-only mortgages.
Is a 30-year mortgage the same as a 30-year fixed rate in Canada?
A 30-year mortgage in Canada is not the same thing as a 30-year fixed rate. In Canada, 30 years describes the amortization, meaning the total time it takes to repay the balance in full. The term is a separate and much shorter contract period that covers your rate and conditions, and it usually runs from 6 months to 10 years. A borrower on a 30-year amortization renews several times before the mortgage is paid off, most often on 5-year terms. American borrowers are typically quoted a 30-year fixed rate, where the term and the amortization period are both 30 years.
Why can’t you get a 30-year fixed-rate term in Canada?
Canadian lenders don’t offer a 30-year fixed-rate term largely because of Section 10 of the Interest Act. On any mortgage with a term longer than 5 years, the Interest Act allows a borrower who isn’t a corporation the right to repay the full balance after the fifth year, with only 3 months’ interest prepayment charged as a penalty. A lender funding a 30-year commitment would be handing that borrower a low-cost exit at year 5, so the cost of the option gets built into the rate. The Canadian Interest Act is why fixed terms beyond 5 years are rarer in Canada compared to the US.
What is the longest mortgage term you can get in Canada?
The longest mortgage term widely available in Canada is 10 years, and only a limited number of lenders offer it. Terms of 1, 2, 3, 4 and 5 years cover the large majority of the market, and the 5-year fixed remains the reference point for pricing. Terms longer than 5 years carry a statutory prepayment right under the Interest Act once the fifth year has passed. This is why a few lenders promote them and a few borrowers choose them. The longest term is a different question from the longest amortization, which reaches 30 years with a prime lender.
Can you get a 30-year amortization on a renewal or a refinance?
A 30-year amortization is available on a refinance but not on a renewal. A renewal carries forward the remaining amortization on the mortgage, so a borrower 5 years into a 25-year schedule renews with 20 years left on the schedule. Stretching the schedule back out to 25 years is considered a refinance, which is capped at 80% of the property’s value and is always uninsured. Mortgage default insurance premiums never apply to borrowers renewing or refinancing, so the longer amortization is paid by the lender through a premium on the rate.
Does a 30-year amortization change your mortgage stress test?
A 30-year amortization does not change the rate you are stress-tested at, but it does change the payment that goes into the calculation. The qualifying rate stays the greater of your contract rate plus 2 percentage points or 5.25%. However, a 30-year amortization produces a lower monthly payment than a 25-year schedule at the same rate; the payment used in your GDS and TDS ratios falls, and that lower payment allows you to qualify for more.
Can you get a 30-year amortization on a rental or investment property?
A 30-year amortization is available on a rental or investment property, but only on an uninsured mortgage. Insured 30-year amortizations are limited to owner-occupied purchases by first-time buyers or buyers of newly built homes, so a rental purchase falls outside this scope entirely. Financing over 30 years therefore means a down payment of at least 20%, which is required for property used purely for rental income.
Final Thoughts
Deciding between an insured 25-year amortization or an uninsured 30-year amortization should depend on your financial circumstances and homeownership goals. If you have the financial standing to choose both but aren’t sure what’s best for your needs, contact nesto mortgage experts for a suitable mortgage strategy to fit your unique needs.
Why Choose nesto
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