Amortization Schedule

How Mortgage Amortization Works in Canada

Amortization is the process of paying off a mortgage through regular scheduled payments over a set period. In Canada, the standard maximum amortization for insured mortgages (less than 20% down) is 25 years, though the government expanded this to 30 years for first-time buyers purchasing new builds as of December 2024. Uninsured mortgages (20%+ down) can be amortized over up to 30 years, and some lenders offer 35-year terms. A longer amortization reduces your monthly payment but substantially increases total interest paid over the life of the loan.

Canadian mortgages use semi-annual compounding (not monthly), as required by the Interest Act. This means the quoted annual rate is compounded twice per year, then converted to an effective monthly rate for payment calculations. The result is slightly lower payments than monthly compounding would produce. Each payment splits between interest and principal: in the early years, most of the payment covers interest. By mid-amortization, the split reverses, and in the final years, nearly all of each payment goes to principal. This front-loading of interest is why extra payments in the early years have such a large impact.

Total Interest Paid: $400,000 Mortgage at 4.5%

Most Canadian mortgages allow prepayments of 10–20% of the original principal per year without penalty, plus the option to increase regular payments by 10–20%. Using these privileges aggressively can shave years off your amortization. Switching from monthly to accelerated bi-weekly payments is another effective strategy: instead of 12 monthly payments, you make 26 half-payments per year, which equals 13 full monthly payments annually. On a 25-year mortgage, this alone can reduce the amortization by roughly 3 years.