Amortization
Definition
Amortization is the total length of time it would take to pay your mortgage down to zero at your current payment — commonly 25 years in Canada, and up to 30 years on some insured and uninsured mortgages.
How it works
Amortization is often confused with the term. The term is the length of your current contract with the lender, usually one to five years. The amortization is the full repayment runway: the number of years remaining until the balance reaches zero. You will typically move through five or six terms over a single 25-year amortization.
Amortization controls the shape of every payment. A longer amortization spreads the principal over more months, so the payment is smaller and it is easier to qualify — but far more of each early payment goes to interest, and the lifetime interest cost rises substantially. A shorter amortization does the opposite: a higher payment, faster equity growth, and much less total interest.
In Canada, the maximum amortization is 25 years when your down payment is less than 20% and the mortgage is insured, with exceptions that allow 30 years for qualifying first-time buyers and newly built homes. With 20% or more down, 30-year amortizations are widely available.
Quick facts
- Term = your current contract. Amortization = the full payoff timeline.
- Insured mortgages are generally capped at 25 years, with defined 30-year exceptions.
- A longer amortization lowers the payment and raises total interest paid.
Put this into practice
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