Can I Get A 30-Year Mortgage?

The standard amortization period for a mortgage in Canada is typically 25 years. This refers to the amount of time it will take to pay off the mortgage in full. Your mortgage amortization is different from your mortgage term, which is the amount of time your mortgage contract is in effect, meaning you’re contractually obligated to pay your lender at a certain interest rate for a fixed period of time. Mortgage terms are typically between six months and 10 years. You’ll have several terms within your mortgage amortization.

With a 30-year mortgage, rather than pay down your mortgage in 25 years, you’ll pay it off in 30 years. The biggest advantage is that you’ll pay less on a monthly basis.

However, it’s important to note that not everyone can qualify for a 30-year mortgage. While 30, 35 and 40 year mortgages were once fairly common, in June 2012 the federal government reduced the maximum amortization period to 25 years for insured mortgages. With an uninsured mortgage, the maximum amortization period is 30 years.

Insured vs. Uninsured Mortgages

If you have less than a 20% down payment, you must purchase mortgage default insurance. These high-ratio or insured mortgages can have a maximum amortization period of 25 years.

However, if you put more than 20% down on a property (or if a property is worth more than $1 million), you do not need (or do not qualify for) mortgage default insurance. These uninsured or conventional mortgages can have a maximum amortization period of 30 years.

These maximums only apply to mortgages held with a prime lender, such as one of the Big Six Banks. You may be able to get a 30-year or longer amortization period with less of a down payment with a private mortgage lender, for example, but you’re likely to pay higher interest.

What Is an “Infinity” Mortgage?

Last year, newspaper headlines screamed with shocked homeowners facing renewal reporting 40, 50 or 60-year amortizations on their mortgage statements. Others reported an infinity symbol where the number of years remaining on their mortgage should be, leaving them to wonder if they’d ever pay off their mortgage completely.

So is it possible to have a 40, 50 or 60-year mortgage? Not really.

A record number of Canadians flocked to variable-rate mortgages during the pandemic when the housing market was hot and interest rates were still low. Then the Bank of Canada hiked interest rates 10 times, from 0.25% in January 2022 to 5.0% in July 2023.

Homeowners who had an adjustable-rate mortgage (ARM) saw their monthly payments rise in sync with the prime rate. However, homeowners who held a variable-rate mortgage (VRM) paid the same amount each month, but the amount they paid in interest changed in sync with the prime rate. Each VRM has a trigger rate, or the point at which the fixed payment only covers the interest rate and none of the principal. Nearly 80% of variable-rate holders hit their trigger rate for mortgages originated between 2020 and 2022, according to a National Bank of Canada report.

When you hit this trigger rate, the monthly mortgage payment is less than the amount of interest charged. The unpaid interest is added to your mortgage balance, which increases rather than decreases the amount you owe. This negative amortization can affect your mortgage in two ways: your mortgage payments will be readjusted (therefore increase) or your amortization increases so it’ll take longer to pay off the loan. Hence the term “infinity mortgage.”

But your mortgage amortization doesn’t actually get longer. According to OSFI in a September 2023 report, a borrower’s contractual amortization period (such as 25 years) remains intact for the duration of the loan:

“When lenders provide borrowers with mortgage statements…they often include a hypothetical amortization period based on a number of factors, including the remaining principal, the anticipated future payments and the current interest rate. This calculation has, for some borrowers, projected amortization periods of 70 or more years, or in some cases an infinite amortization period. These kinds of projected amortizations are not realistic and do not represent what a borrower’s actual repayment period will be. Importantly, they do not change the borrower’s contractual amortization.”

The report goes on to emphasize that these 40, 50 pr 60-year amortization periods are hypothetical calculations. Put differently, when your mortgage comes up for renewal, the longest you can amortize your loan is still 30 years.

Homeowners who put more than 20% down payment on a property or who are purchasing a property worth more than $1 million (and are therefore ineligible for mortgage default insurance) are eligible for a 30-year mortgage with a prime lender. Alternative lenders may have different eligibility requirements.

Like any financial product, there are pros and cons to a 30-year mortgage depending on your financial situation and goals.

Pros

• Your monthly mortgage payments will be lower.
• You’ll have more flexibility with the rest of your budget.
• If you take advantage of lump sum prepayments, you can reduce the effective term of the loan.
• You don’t need to pay mortgage default insurance, so your overall loan for an uninsured mortgage will be less.
• You may be able to get into the housing market faster as your qualifying income levels are lower with a longer amortization period.

Cons

• To qualify, you’ll need a down payment of at least 20%.
• Your interest rate will likely be higher.
• You’ll be paying more interest over the course of the loan if you don’t make prepayments.
• You’ll be making mortgage payments for a longer period of time.
• It takes longer to build equity in your home.

Assuming a property worth $1.2 million in Vancouver, B.C., with a 20% down payment and a 5-year fixed-rate mortgage term, here’s how the cost compares between a 25-year mortgage and a 30-year mortgage.

With a 30-year mortgage, you’ll pay $386 less per month or $4,632 less per year. However, at the end of the five-year term when your mortgage comes up for renewal, the outstanding balance on your mortgage will be $888,498, or $31,789 more than if you opted for a 25-year mortgage amortization. You will also have paid $8,618 more in interest.

However, if your mortgage contract allows for a prepayment, such as 10% or 20% of the original principal amount, you can take advantage of the lower payments of a 30-year mortgage and put your prepayment directly to the principal owing on the loan.

There are times when it makes sense to choose a longer amortization period, including:

• If you want lower monthly payments.
• If you anticipate a life change in the future, such as starting a business or a family, and you want flexibility with your mortgage payments.
• If your mortgage contract allows for prepayments and you can pay down the principal directly.
• If your current income isn’t high enough to qualify for a shorter amortization.

However, it’s important to understand the true costs of a longer amortization before making this decision.

Related: Should You Extend Your Mortgage Amortization?

Economists forecast interest rate relief later this year, but mortgage rates are still uncomfortably high for many Canadians. If you have more than a 20% down payment or if you are purchasing a home worth more than $1 million, choosing a 30-year mortgage may be an effective way to ease the pain of your monthly mortgage payments.