Understanding Mortgage Amortization in Canada
How amortization periods affect your monthly payment and total interest paid — and why the difference between 20 and 25 years matters more than you think.
When you take out a mortgage, the amortization period is the total length of time it will take to pay off your loan in full. In Canada, the most common amortization is 25 years, though insured mortgages (less than 20% down) are capped at 25 years, while conventional mortgages can go up to 30.
How Amortization Affects Your Payment
A longer amortization means lower monthly payments — but you pay significantly more interest over the life of the loan.
Example: $500,000 mortgage at 5.25%
| Amortization | Monthly Payment | Total Interest | |---|---|---| | 20 years | $3,375 | $309,900 | | 25 years | $2,998 | $399,300 | | 30 years | $2,762 | $494,300 |
Going from 20 to 25 years saves you $377/month — but costs an extra $89,400 in interest.
The Semi-Annual Compounding Rule
Canadian mortgages compound interest semi-annually, not monthly like in the US. This means the effective monthly rate is slightly lower than simply dividing the annual rate by 12.
The correct formula: monthly rate = (1 + annual rate / 2)^(1/6) − 1
This is why you can't use a standard US mortgage calculator for Canadian mortgages — the numbers will be slightly off.
What Happens at Renewal?
Most Canadian mortgages have a term of 1–5 years, after which you renew at current market rates. Your amortization clock keeps ticking — so if you took a 25-year amortization and renew after 5 years, you have 20 years remaining.
The Fastest Way to Pay Down Your Mortgage
Switching to accelerated bi-weekly payments is the single easiest way to shorten your amortization. Instead of 12 monthly payments, you make 26 half-payments — effectively making one extra monthly payment per year.
On a $500,000 mortgage at 5.25%, this shaves roughly 3 years off your amortization and saves over $50,000 in interest.
Use our Bi-Weekly Savings Calculator to see the exact numbers for your mortgage.