While 25-year mortgages are the most common among Canadian homeowners, 30-year mortgages have their appeal. With a 30-year amortization, your monthly mortgage payments will be lower, giving you more financial flexibility month-to-month. However, stretching out payments over an extra five years means you’ll almost certainly pay more interest over the life of the loan.
What Is a 30-Year Mortgage in Canada?
In Canada, a “30-year mortgage” refers to a 30-year amortization period, meaning the loan is scheduled to be paid off in 30 years of regular payments. It does not mean you have a 30-year fixed interest rate term (as is common in the U.S.). In fact, Canadian mortgages are usually broken into shorter terms (often 5 years or less) even if the amortization is 30 years. At the end of each term, you renegotiate or renew the mortgage at the prevailing rates until the full amortization period is complete.
Historically, Canadian homebuyers typically amortize mortgages over 25 years (the default maximum for insured mortgages). Until recently, 30-year amortizations were only available on uninsured mortgages (those with at least a 20% down payment) – insured mortgages with smaller down payments were capped at 25 years. In fact, Canada once briefly allowed 35- and 40-year amortizations in the early 2000s, but regulations tightened to a 25-year maximum for insured loans by 2012.
Who Can Get a 30-Year Mortgage in Canada?
Yes – 30-year mortgages do exist in Canada, but qualifying for one has specific requirements. If you make at least a 20% down payment (resulting in a low-ratio/uninsured mortgage), many lenders will offer a 30-year amortization. This is because avoiding the need for Canada Mortgage and Housing Corporation (CMHC) default insurance removes the 25-year cap that insured mortgages have. In other words, with 20% or more down, you can opt for a 30-year amortization in most cases.
For those with smaller down payments (<20%), the situation has recently changed. Traditionally, high-ratio (insured) mortgages were limited to 25-year amortizations by law. Recently, however, the federal government introduced new programs to extend amortizations to 30 years for certain borrowers:
- First-time home buyers: As of late 2024, all first-time buyers can qualify for a 30-year amortization on insured mortgages, regardless of their down payment size. Even if you only have 5 – 10% down (which normally requires CMHC insurance), if you’re a first-time buyer you may now be eligible for a 30-year mortgage term (amortization).
- Newly built homes: Also, anyone purchasing a newly constructed home can access a 30-year amortization, even if they are not a first-time buyer. This was done to encourage new housing supply and improve affordability for those buying new builds.
These measures – described as “the boldest mortgage reform in decades” – took effect on December 15, 2024. They expand a more limited program from August 2024 that had allowed 30-year insured mortgages only for first-time buyers purchasing new builds. Now, any first-time buyer (of any property) or anyone buying a new construction home can opt for a 30-year amortization even with a smaller down payment. Keep in mind the home price still needs to fall under the insured mortgage limit (which was concurrently raised from $1 million to $1.5 million).
Important
Even with these changes, borrowers who don’t fit the above categories and who have down payments under 20% remain limited to 25-year amortizations. But if you start with a 25-year insured mortgage, you can later extend to 30 years once you’ve built at least 20% equity (for example, upon renewal or refinancing as an uninsured mortgage). This often happens as people renew their mortgages after a few years of payments or lump-sum prepayments that push their equity above 20%.
Finally, note that some alternative or subprime lenders have occasionally offered amortizations longer than 30 years (even up to 35 – 40 years). These are less common and typically come with higher rates or conditions. For most borrowers and major lenders, 30 years is the maximum amortization available today.
Pros and Cons of a 30-Year Mortgage
Choosing a 30-year mortgage in Canada has significant advantages in terms of affordability, but also notable drawbacks. Let’s break down the key pros and cons:
Pros
- Lower Monthly Payments: Spreading your mortgage over 30 years instead of 25 reduces your required monthly payment. By stretching out the amortization an extra five years, your monthly payment can decrease substantially. This can relieve budget pressure and make homeownership more affordable month-to-month.
- Increased Purchasing Power: Lower payments mean you may qualify for a larger loan than you would with a 25-year amortization. In other words, a 30-year mortgage can increase your purchasing power, possibly enabling you to afford a more expensive home. For buyers struggling with the mortgage stress test or debt ratios, the extended timeline can help meet the requirements.
- Greater Cash-Flow Flexibility: With smaller payments, you free up cash flow for other needs or investments. You also have more room to make prepayments on your mortgage when you have extra funds. In fact, having a lower mandatory payment gives you the option (but not the obligation) to pay more towards principal whenever possible, potentially shortening the effective payoff time if you utilize prepayment privileges. This flexibility can be useful in a high-interest rate environment or if your income fluctuates.
- No CMHC Insurance Premium (if Uninsured): If you go the uninsured route (20%+ down), one perk is you avoid the CMHC mortgage insurance premium altogether. That can save you a significant upfront or added cost on your mortgage. (First-time buyers using the new 30-year insured option will still pay insurance premiums, though spread over the mortgage or added to the balance).
Cons
- Higher Lifetime Interest Cost: The biggest downside is that you will pay much more interest over 30 years than over 25. With five extra years of payments, interest has a longer time to accrue. All else equal, a longer amortization means the total interest paid can be tens of thousands of dollars higher. (We’ll quantify this in the next section.) This extra cost can significantly increase the overall price of your home.
- Slower Equity Build-Up: Because your payments are lower and stretched out, you pay down the principal more slowly. In a 30-year mortgage, it takes longer to build home equity since more of each payment goes to interest (especially in the early years) compared to a 25-year schedule. This slower equity growth means it will take more time to reach milestones like 50% loan paid off, and you may build wealth in your home at a more sluggish pace.
- Potentially Higher Interest Rates: Some lenders charge slightly higher interest rates for longer amortizations. Mortgages with 30-year amortizations can come with a rate premium compared to 25-year mortgages. Additionally, uninsured mortgages (often 30-year) sometimes have higher rates than insured ones, since the lender is taking on more risk without default insurance. The rate difference isn’t always large (big banks may only charge ~0.1 – 0.2% higher for 30-year), but it adds to your cost. For insured 30-year mortgages, there is also a premium surcharge (currently about 0.20% of the loan) on the CMHC insurance for extending from 25 to 30 years – which ultimately increases your mortgage balance or upfront costs slightly.
- Requires Larger Down Payment (in many cases): Until the recent rule changes, accessing a 30-year term effectively required a 20% down payment. Even now, if you’re not a first-time buyer or buying new construction, you’ll need 20% down to get a 30-year mortgage. Coming up with that down payment can be a barrier for many buyers. For example, on a $600,000 home, 20% down means $120,000 cash needed upfront, whereas an insured 25-year mortgage might only require $35,000 down. So the 30-year option might be out of reach for some buyers unless they qualify under the new first-timer/new-build programs or have substantial savings.
- Longer Debt Horizon: Carrying mortgage debt for 30 years means potentially making payments well into your retirement years, depending on your age when you buy. Three decades is a long commitment – it could even interfere with other financial goals like saving for retirement, children’s education, etc.. Some people may not want to still have a mortgage in their 60s or 70s. With a 25-year amortization, you’ll be mortgage-free sooner, which can be a big relief and free up income for other uses later in life.
25-Year vs 30-Year Mortgage: Impact on Payments and Interest
To truly understand the trade-off, it helps to look at a side-by-side comparison. By extending your amortization to 30 years, you save on monthly payments but incur more interest overall. Here are some examples to illustrate the difference:
- NerdWallet Example:
In one scenario based on Canada’s average home price (around $676,000) at a 4% interest rate, a 20% down payment was assumed for both 25-year and 30-year mortgages. The monthly payment on the 30-year mortgage came out about $273 lower than the 25-year ($2,574 vs $2,847). However, the total interest paid over the life of the 30-year would be about $72,400 more than with a 25-year amortization. In other words, you’d save on your monthly cash flow, but end up paying tens of thousands more in interest in the long run.
- First-Time Buyer Scenario:
For the same home price, if a buyer only put the minimum down payment (making the mortgage insured), the difference becomes even more stark. Because the 30-year option allows a smaller down payment with insurance, the monthly payment was about $333 lower with a 30-year amortization than a 25-year. But factoring in mortgage insurance and the longer term, the interest cost over time was roughly $88,000 higher with the 30-year mortgage. This shows how much extra interest an extended amortization can accrue when starting with a smaller down payment (and larger loan principal).
- Ratehub Study Example:
A Ratehub.ca analysis looked at a $500,000 mortgage and compared 25 vs 30 years. It found that increasing the amortization from 25 to 30 years would reduce the monthly payment from about $3,161 to $2,934 (a savings of $227 per month) but would increase the total interest paid from roughly $448,200 to $556,150. That’s an additional $107,950 in interest over the life of the loan – a huge extra cost for the benefit of lower monthly payments. This underscores that the longer your mortgage timeline (especially at higher interest rates), the more interest piles up.
As these examples show, the trade-off is clear: a 30-year mortgage can significantly ease your monthly payment burden, which might help you qualify for a home and manage cash flow, but it can also cost you substantially more in interest in the long run.
Before choosing a 30-year amortization, you should consider whether the immediate relief in payments is worth the long-term expense. It often comes down to your current financial need versus your future financial burden.
Is a 30-Year Mortgage Right for You?
Choosing between a 25-year and 30-year mortgage depends on your personal financial circumstances, goals, and the housing market conditions. Here are some considerations to help you decide:
Current Affordability vs. Long-Term Cost
If your priority is to reduce your monthly payments right now – for instance, because interest rates are high or your budget is tight – a 30-year mortgage can be a lifesaver by lowering those payments. This can make the difference in qualifying for a mortgage or being able to comfortably carry one, especially for younger buyers facing high home prices. The federal government introduced 30-year options for first-time buyers specifically to address this affordability challenge for Millennials and Gen Z. On the other hand, if you can manage the higher payments of a 25-year schedule, you’ll save a lot of money in interest and be debt-free sooner. Consider whether the short-term relief outweighs the long-term cost in your situation.
Your Stage of Life and Goals
Think about where you’ll be in 25 or 30 years. Will you be nearing retirement when the mortgage is finally paid off? Carrying mortgage debt later in life can impact your retirement plans. If being mortgage-free sooner is important to you for peace of mind or to free up income for retirement savings, you might lean toward a shorter amortization. On the flip side, if you’re early in your career or expect your income to grow, taking a 30-year now for flexibility and planning to accelerate payments later could be a valid strategy.
Discipline and Future Changes
Opting for a 30-year amortization doesn’t lock you into taking 30 years to pay off the loan. You can make extra payments (up to your prepayment limits) or increase your payment amounts later to effectively shorten the amortization. Many Canadians with 30-year mortgages choose to pay them down faster once their incomes rise or if interest rates come down.
For example, you could start with a 30-year to keep payments low during expensive early years, then increase your payments over time and maybe renew into a shorter schedule. This approach gives you flexibility – but it requires discipline to actually make those additional payments. If you only ever make the minimum 30-year payments, you’ll pay the maximum in interest. So be realistic about your financial habits and whether you will take opportunities to prepay.
Qualifying and Down Payment
If you cannot qualify for the home you need with a 25-year amortization (due to debt service ratios), then a 30-year might be your only option to get into the market. In that case, it can be a useful tool. Also, if you have at least 20% down or you fall under the new insured 30-year programs (first-time buyer or new build), then you have the choice available. But if you only have, say, 10% down and you’re not a first-time buyer, a 30-year isn’t on the table – you may need to either increase your down payment or adjust your price range. Always check with a mortgage professional about what you qualify for under current rules.
Market Factors
Consider the interest rate environment. In a high-rate environment, the payment difference between 25 and 30 years is magnified (and so is the interest cost difference). In a low-rate environment, the payment difference might be smaller and more of your payment goes to principal, possibly making a shorter amortization easier to handle.
Also, keep in mind that easier credit (like longer amortizations or lower rates) can lead to higher home prices overall – so a 30-year mortgage, if widely used, might indirectly contribute to rising prices, which doesn’t help affordability in the long run. This is more of a macro consideration, but it’s worth noting that buying as much house as you can afford with a 30-year loan could mean you’re stretching, especially if the market is heated.
A 30-year mortgage can be a great option to make payments more manageable, particularly for first-time buyers in expensive markets or during periods of high interest rates. It can literally put homeownership within reach when a 25-year schedule would push it out of reach. However, it isn’t “free money” – you are trading short-term relief for long-term cost.
Before committing to a 30-year amortization, run the numbers (or use an online amortization calculator) to see the total cost difference, and make sure you’re comfortable with it. It’s wise to consider all your options and perhaps speak with a mortgage broker or advisor about your decision. They can help you explore scenarios: for example, maybe a 27-year amortization (if available) could strike a balance, or perhaps you qualify for a slightly cheaper home with a 25-year term that would be better financially in the long run.
If you do choose a 30-year mortgage, have a plan for the future. You might aim to increase your payments later or make lump-sum prepayments when possible to chip away at the principal faster. That way, you maintain flexibility now but still save on interest in the long run. Every homeowner’s situation is different – the key is to ensure the mortgage you choose aligns with your financial comfort level and goals.
Conclusion
You can get a 30-year mortgage in Canada – yes, it’s available both through uninsured loans (with 20% down) and now through special programs for first-time buyers and new builds with smaller down payments. This longer amortization can dramatically lower your monthly payments and help you afford a home in today’s pricey market. But no, it’s not necessarily the best choice for everyone, since it will cost you more in interest and keep you in debt longer. On average, competitors and studies estimate that opting for a 30-year over a 25-year can add tens of thousands of dollars in extra interest payments over the life of your mortgage.
When deciding between a 30-year and a 25-year mortgage, include a comparison of the long-term costs in your analysis. Consider your financial priorities: is the immediate budget relief worth the additional cost?
For many first-time Canadian homebuyers, the answer might be yes, at least to get a foot in the market. For others who value long-term savings or who can afford higher payments, the answer could be no. The choice should be based on a clear understanding of the trade-offs and your own circumstances.
Average out what competitors suggest: nearly all experts agree that if you do take a 30-year mortgage, you should try to pay it off faster whenever you’re able – this way you get the best of both worlds (the flexibility of a longer term, but without all the extra interest). And if you’re unsure, don’t hesitate to get professional advice. A mortgage broker can walk you through different scenarios and help you make the decision that’s right for you. With careful planning, you can make the most of whichever mortgage option you choose and achieve homeownership in a way that aligns with your financial goals.
