Is a 30-Year Mortgage Right for You?

Signing a 30-year mortgage in Canada can be an appealing option for some buyers as housing prices remain high and interest rates sit above recent historic lows. This is especially true for first-time buyers and homeowners approaching mortgage renewal.

While prices in Toronto have eased slightly—averaging $1.16 million in May 2024, according to the Toronto Regional Real Estate Board—values are still elevated compared with the pre-2020 market. In other cities such as Vancouver, prices continue to climb: the Canadian Real Estate Association reported a benchmark price of about $1.2 million for all residential properties in Vancouver, a 2.3% year-over-year increase.

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Even as the Bank of Canada signals potential rate cuts ahead, historically high borrowing costs continue to strain many households. Anyone who locked in a mortgage over the past year likely secured a rate considerably higher than the ultra-low levels seen in 2020, and roughly 3.4 million mortgages are scheduled to renew in 2025, increasing financial pressure for many homeowners.

Under these conditions, some buyers find that a 30-year amortization gives them breathing room by lowering monthly payments and allowing them to qualify for a larger mortgage. Stretching payments over a longer period reduces each monthly installment but increases total interest paid over the life of the loan.

“With higher living costs and rising rates, I’m seeing more clients struggle,” says Micah Verceles, a Vancouver-based mortgage broker. “Extending amortization can ease monthly cash flow, depending on the mortgage size.”

First-time home buyers have access to 30-year mortgages

Starting August 1, 2024, certain first-time buyers can access a 30-year amortization even with a down payment under 20%—but only under specific conditions. The property must be a new build and priced below $1 million. Additional policy changes are expected in December 2024. These government adjustments aim to broaden access while balancing systemic risk.

25- versus 30-year mortgages

The primary difference between 25- and 30-year mortgages is the amortization period—the time it takes to fully repay the loan. A longer amortization lowers monthly payments but increases the total interest paid. Mortgage “terms,” which define the contract length and interest rate for a set period, typically span a few months to several years and are usually shorter than the amortization. That means borrowers on a 30-year amortization will likely negotiate new terms with their lender several times before the loan is fully repaid.

Most 30-year mortgages in Canada are considered low-ratio loans, which require a minimum 20% down payment. High-ratio mortgages—those with less than 20% down—must be insured. Mortgage default insurance through the Canada Mortgage and Housing Corporation (CMHC) protects lenders from borrower default but is not available for standard 30-year amortizations. That restriction can influence both access and pricing of mortgage products.

The pros and cons of a 30-year mortgage

A 30-year mortgage can help buyers afford higher-priced properties by spreading principal payments across an additional five years compared with a 25-year amortization. For example, on an average-priced home selling for $699,117 (May 2024 national average) with a 20% down payment and a hypothetical five-year fixed rate of 4.99%, monthly payments would be lower on a 30-year amortization than on a 25-year amortization. That difference can free up monthly cash flow and improve qualifying ability in competitive markets.

The trade-off is substantial: longer amortizations lead to significantly more interest paid over the life of the loan. Using the example above, a borrower with a 30-year amortization could pay tens of thousands more in interest versus a 25-year schedule, assuming the same interest rate over the full term—an unlikely real-world scenario but useful for comparison.

Because CMHC insurance is generally unavailable for 30-year amortizations, lenders may charge higher interest rates to reflect added risk. In many cases, insured mortgages benefit from slightly lower rates because the insurer, not the lender, bears part of the default risk.

Pros

Lower monthly payments by spreading principal over a longer period
Improved ability to qualify for higher-priced homes

Cons

Higher total interest costs over the life of the mortgage
Typically not eligible for CMHC mortgage insurance, which can raise rates
Minimum 20% down payment required for most 30-year mortgages

Can you get a mortgage of more than 30 years?

Longer amortizations—35, 40 or even multi-generational terms—exist in some countries, and Canadian lenders historically offered 40-year mortgages before policy changes following the 2008 financial crisis. Since then, maximum amortizations were reduced to 35 and later to 30 years to limit household leverage. Some alternative or private lenders still offer longer amortizations, but usually at significantly higher interest rates.

Given ongoing affordability pressures in major housing markets, longer amortizations remain an attractive option for some buyers. Whether federal policy will change to permit broader access to amortizations over 30 years is uncertain, but any move would aim to balance affordability with systemic financial stability.

Should you get a 30-year mortgage?

A 30-year amortization can be a practical tool for buyers—particularly first-time buyers or those in expensive markets—who need lower monthly payments to qualify for a mortgage. However, it’s important to weigh short-term affordability against long-term cost: the lower monthly payment comes with higher overall interest charges and potentially higher rates if mortgage insurance isn’t available.

The right decision depends on your financial situation, goals and risk tolerance. If your priority is reducing monthly expenses or qualifying for a pricier home today, a 30-year mortgage may help. If minimizing total interest and owning your home faster are more important, a shorter amortization is generally better. Speak with a trusted mortgage broker or financial adviser to compare scenarios and run payment and interest projections before committing.