Clay Jarvis
Beth Buczynski 
While 25-year mortgages are the most common among Canadian homeowners, 30-year mortgages have their appeal, too.
With a 30-year mortgage, you’ll get lower monthly payments and more flexibility than you might with a mortgage that amortizes over 25 years. But you might also pay more for your home overall.
Here’s a primer on 30-year mortgages in Canada that will help you decide if an extended mortgage amortization is right for you.
Who can get a 30-year mortgage in Canada?
According to Canadian lending laws, you can only apply for a 30-year mortgage if you’re making a down payment of at least 20%.
That down payment threshold can make the upfront cost of 30-year mortgages prohibitively high. Getting a 30-year mortgage for an $600,000 home, for example, would require a down payment of at least $120,000.
With a 25-year mortgage, the minimum down payment can be as low as 5%.
Pros and cons of a 30-year mortgage
Even if you’re eligible for a 30-year mortgage, it’s crucial to understand both the benefits and drawbacks of these loans.
Pros
- Smaller mortgage payments: By stretching your mortgage out an extra five years, your monthly payment will decrease. In addition to helping a home purchase better fit into your budget, smaller mortgage payments can also keep your total debt service ratio in check, which may encourage lenders to finance larger home purchases.
- Flexibility: Because 30-year mortgages aren’t insured, they tend to offer borrowers a little more maneuverability than loans with shorter terms. A 30-year mortgage, for example, may allow you more freedom to make prepayments that shorten the life of your loan, much the same way an open mortgage would give you more prepayment leeway than a closed mortgage. You might also be able to port a 30-year mortgage to a new property worth more than $1 million, which can allow you to purchase a new home in the middle of your mortgage term without having to break your mortgage contract.
Cons
- Paying more in interest: There are two reasons why you might pay more interest on a 30-year mortgage. First, your mortgage is longer, which means more time for you to be charged interest. Second, the interest rate you’re charged will likely be higher than for a mortgage with an amortization of 25 years or less. Paying a higher interest rate for a 30-year mortgage makes sense when you consider that loans of this length aren’t eligible for mortgage default insurance, which protects the lender if the mortgage isn’t repaid. Lenders that offer a 30-year mortgage take on extra risk, and when loans get riskier, the costs for borrowers tend to be higher.
- More debt for longer: Three decades is a long time to pay back a debt, especially if it takes you close to retirement. If you’re still plugging away at a 30-year mortgage when you’re 64, for example, it might mean putting less into your RRSP or TFSA than you’re comfortable with.
30-year mortgages vs 25-year mortgages: A cost comparison
Now that we’ve looked at some of the most important aspects of a 30-year mortgage, let’s see how one might differ in cost from the more common 25-year mortgage.
For the first example, we’ll use a home that sold for Canada’s average sale price in February 2023, $662,437. To make for a simple, apples-to-apples comparison, we’ll use the same down payment amounts and interest rates.
| 30-year mortgage | 25-year mortgage | |
|---|---|---|
| 20% down payment | $132,487 | $132,487 |
| Interest rate | 5% | 5% |
| Monthly mortgage payment (5-year term) | $2,828 | $3,082 |
| Total interest paid | $488, 236 | $394,715 |
| Total mortgage cost | $1,018,185 | $924,665 |
All things being equal, you’d save $93,520 in interest costs if you were to opt for a 25-year mortgage in this scenario. But the lower mortgage payments associated with the 30-year mortgage might help you qualify for more financing and leave more breathing room in your budget.
Here’s a more real world example using the same house price, but accounting for the discrepancy in rates you might encounter when comparing 30- and 25-year mortgages. We’ll also use minimum required down payment amounts since not everyone can afford to put 20% down.
| 30-year mortgage | 25-year mortgage | |
|---|---|---|
| Minimum down payment | $132,487 | $41,244 |
| Interest rate | 5.19% | 4.94% |
| Monthly mortgage payment (5-year term) | $2,889 | $3,735 |
| Total interest paid | $509,972 | $474,570 |
| Total mortgage cost | $1,039,922 | $1,120,611 (includes mortgage default insurance costs) |
In this example, you’d pay $35,402 more in interest costs if you were to opt for the 30-year mortgage — but the overall cost would be $80,689 less, and your monthly payments would be $846 lower.
That’s the result of putting down a larger down payment. In the 25-year example, not only would you borrow an extra $91,243, but you’d also be on the hook for mortgage default insurance, which is required if you put less than 20% down.
Deciding whether a 30-year mortgage is right for you means digging into these kinds of details with a trusted mortgage professional. If you have the funds available to put 20% down on a home, a 30-year mortgage should be one of many options at your disposal.
Frequently asked questions about 30 year mortgages
Yes. If you have a minimum down payment of 20%, you should be eligible for a 30-year mortgage in Canada.
A 30-year mortgage isn’t necessarily good or bad. You could pay more in interest than if you signed a 25-year mortgage, but the lower monthly mortgage payments could make life more affordable and less stressful overall.
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