30-year Amortization Rate in Canada – Does It Exist? Can I Get It? Will It Come Back?

August 10, 2023

30-year Amortization Rate in Canada – Does It Exist? Can I Get It? Will It Come Back? - Featured Image

If you’ve been searching for a 30-year amortization mortgage in Canada, you may have come up empty-handed. Most mortgages are limited to a 25-year amortization period, as this is the maximum amount allowed for mortgages covered by CMHC Insurance. This doesn’t necessarily mean you can’t get a 30-year mortgage, but you have to do a little extra work to obtain one.

In this article, we’ll discuss the current state of 30-year mortgages in Canada, what options you have if you’re looking for a longer mortgage term, and whether or not we can expect to see the return of the 30-year mortgage in Canada. We’ll also look at the differences between a shorter-term and 30-year mortgage rate in Canada, and why you might choose one over the other.

What is the 30-Year Amortization Rate?

The 30-Year Amortization Rate refers to the length of time it takes to fully repay a mortgage loan over a period of 30 years. It is a common term used in the mortgage industry and plays a significant role in determining monthly mortgage payments for homeowners in Canada.

When it comes to mortgages, the 30-year amortization rate is a popular option for many Canadians. With the ability to spread the payments out over a longer period, it allows for more manageable monthly payments.

However, the maximum amortization period for mortgages covered by CMHC Insurance in Canada is 25 years, leaving many Canadians wondering if they can still get a 30-year mortgage in Canada.

Mortgage Paperwork

Advantages & Disadvantages of a 30-Year Mortgage

When choosing between a 25-year mortgage and a 30-year mortgage, it’s important to consider the advantages and disadvantages of both.

With a 30-year mortgage, you will have lower monthly payments due to the more extended amortization period. This can help make your home more affordable if you are on a tight budget or don’t have access to large amounts of money upfront.

However, the downside to having a 30-year mortgage is you will end up paying more in interest over the course of the loan. This can make a 30-year mortgage more expensive overall compared to a shorter amortization period.

Additionally, since your payments are spread out over such a long period, you may become ineligible for certain loan programs or find it difficult to refinance in the future.

You can use an online tool like our Mortgage Calculator to see how different mortgage terms could affect your home purchase. 

Can I Get a 30-Year Mortgage in Canada?

The answer is yes, but with a few caveats. While the maximum amortization period for CHMC mortgages in Canada is 25 years, some lenders offer a low-ratio 30-year mortgage.

A low-ratio mortgage is one where the loan-to-value (LTV) ratio is less than 80%, meaning that the borrower has at least 20% equity in the property. These mortgages are not covered by CMHC Insurance, so there may be other restrictions such as a higher interest rate or a requirement for additional down payment and closing costs.  

Loan To Value Ratio

High-Ratio Vs. Low-Ratio Mortgage: Which Is Better?

The decision between getting a high-ratio and low-ratio mortgage largely depends on your financial situation and the amount of equity you have in your home.

If you have a good credit score and can afford at least a 20% down payment on your property, a low-ratio 30-year mortgage may be an attractive option for you. As well as having smaller mortgage payments by spreading the cost out over a longer period, a 20% down payment means you also won’t have to pay for mortgage insurance.

On the other hand, if you don’t have a good credit score or can’t afford a large down payment, then a high-ratio mortgage might be more suitable for your needs. Although this type of mortgage has higher interest rates and shorter amortization periods due to the CMHC insurance requirements, it can still make financial sense in some situations.

If you’re unsure if your mortgage will meet the required loan-to-value ratio, you can use our online Loan-To-Value calculator to find out. Simply enter the value of your home and the amount of down payment you’re able to afford, and 

Will the 30-Year Mortgage Come Back to Canada? 

It’s hard to say for sure whether or not the 30-year mortgage will come back to Canada, especially given the current financial turmoil. However, with more lenders offering low-ratio 30-year mortgages, and with the Canadian government’s commitment to increasing access to housing, it’s possible that the return of the 30-year mortgage could be on the horizon. 

In the meantime, those looking for a longer amortization period do have other options available to them. Many lenders offer extended payment plans that allow borrowers to make larger payments each month or bi-weekly, which reduces their overall loan amount and amortization period. These plans can be a great way to pay off your mortgage faster and save on interest, without having to take out a longer-term loan. 

Whatever option you choose, it’s important to work closely with your lender or financial advisor to determine the best mortgage solution for your needs. With so many options available, there’s sure to be one that works for you. 

Mortgage Meeting

Next Steps for Canadians Looking to Get a 30-Year Mortgage

If you are considering taking out a 30-year mortgage in Canada, your first step should be to talk to your lender or financial advisor to assess your financial situation and determine if this type of loan is right for you.

You’ll also want to compare rates from different lenders, as there may be differences between the low-ratio and high-ratio loans that you’ll want to consider. 

Finally, it’s always a good idea to get pre-approved for a mortgage before you start shopping for a home. This will help give you an idea of how much home you can afford and make the process of finding your dream home easier. With the right advice and preparation, you can find the perfect 30-year mortgage in Canada to fit your needs. 

Once you do have a 30-year mortgage in hand, it’s important to remember to make your payments on time and budget for any extra costs that may come up during the course of your loan. With good financial management and careful planning, you can enjoy the benefits of a longer amortization period without getting stuck with an unmanageable debt burden. 

If you’re looking for a 30-year amortization mortgage in Canada, your options may be limited but not completely out of reach. While some lenders offer low-ratio 30-year mortgages, these may come with higher interest rates and additional costs.

Also, there are extended payment plans available which allow for larger payments per month or bi-weekly, which can help reduce the loan amount and amortization period without having to opt for a longer-term loan. Ultimately, it is important to work closely with your lender or financial advisor to figure out the best solution for you. 

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About the Author:

At Sterling Homes, our mission is to provide the opportunity for affordable homeownership without compromise. Over the last 70 years, Sterling Edmonton has quickly become one of Edmonton’s most popular builders. We bring more than seven decades worth of exceptional customer service, superior design and unparalleled craftsmanship to the greater Edmonton area. As a member of the Qualico Group, Sterling Homes focuses on greater Edmonton’s finest family communities, while being able to offer some of the region’s most family friendly prices thanks to volume purchasing power for materials, trades and land. This has not only made Sterling one of Edmonton’s bestselling, move-up builders, but also one of the industry’s most respected home providers. It is through our uncompromising commitment to our customers that we proudly deliver the Sterling Advantage – that’s why each and every home we build includes a 10-year home warranty, a completion guarantee and new home warranty excellence rating. Our Advantage is our pledge that, when you build your dream home with Sterling, we will deliver a timely, well-built home you’re sure to enjoy for years to come.

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