Should you get a 30-year mortgage? 

The pros and cons of a 30-year mortgage

Signing up for a 30-year mortgage allows a buyer to stretch their mortgage payments over a longer period of time. “You’re spreading your debt over five extra years [compared to 25-year mortgages]. That usually gets you a higher purchase price or mortgage amount that’s needed in the big markets,” explains Verceles.

On a home selling for $699,117 (the average Canadian home price as of May 2024), a buyer who puts 20% down and takes out a 30-year mortgage at a five-year fixed rate of 4.99% will pay $2,982 a month on their mortgage. (You can run the calculations yourself using a mortgage payment calculator.) Another buyer with the same down payment and mortgage terms but a 25-year amortization would shell out $3,250—that’s $268 more than the first buyer every month, or an extra $3,216 a year. 

At first glance, the 30-year mortgage seems like the better choice—except that the buyer would end up paying a total of $514,068 in interest over the life of the mortgage, assuming rates did not change. The 25-year mortgage buyer, on the other hand, would pay $415,615 in total interest —a difference of $98,415 on the same mortgage principal. 

In Canada, a 30-year mortgage is not insurable through the CMHC, meaning a minimum 20% down payment is required. This can make it more difficult to purchase the home that you want. A 15% down payment on a $748,450 house is $112,268. At 20%, the down payment jumps to $149,690—meaning you will need to access $37,422 more.

Plus, Verceles says, mortgage lenders tend to give borrowers slightly better rates for mortgages covered through CMHC insurance, because the lender isn’t the one shouldering the risks of a default. Usually, those savings can amount to a quarter of a percent in interest, according to Verceles.

Can you get a mortgage of more than 30 years?

In some countries, mortgages with terms of 35, 40 and even 100 years, such as Japan, are not unheard of. The long term mortgages are intended to be paid over multiple generations. Canada’s major lenders once offered 40-year mortgages, but that ended when the North American housing bubble burst in 2008. Shortly after that meltdown, Canada’s Department of Finance decreased the maximum amortization to 35 years, then later reduced it to 30 years.

“They don’t want people to leverage themselves too far,” Verceles explains. (Some alternative lenders still offer 35- and even 40-year mortgages, albeit with steeper interest rates than a shorter mortgage from a bank.)

Widespread concern about housing affordability in Canada have made the idea of longer amortization periods more attractive to homebuyers, but Verceles says he isn’t sure whether the Canadian government will loosen rules to allow 30-plus-year amortizations again. But given the importance of real estate to Canada’s economy, it’s possible that the federal government may to ease the financial burden of homebuyers by letting them spread out their payments over a longer period of time.