25 Year vs 30 Year Amortization: A Practical Guide

Tim Lyon • January 25, 2026

When you take on a new mortgage, you are not just choosing a rate and a lender. You are also choosing how long you plan to pay that mortgage back over time, which is called your amortization period.


For most new mortgages in Canada, the standard options are 25 years or 30 years. Some alternative lenders will go higher than 30 years and some clients choose less than 25, but the vast majority start with one of those two choices.


On paper, the difference between 25 and 30 years might look small. In reality, it affects:

  • How much your monthly payment is
  • How much total interest you pay
  • How quickly you become mortgage free
  • How much you can qualify for


In this blog, I will walk through the trade offs in plain language, give you a simple example with real numbers, and share a framework I use with clients to decide what makes the most sense.



What is an amortization period?

Your amortization period is the total length of time you spread your mortgage over.

  • A 25 year amortization means your payments are set up so that, if you keep that schedule the whole way through, your mortgage would be fully paid off in 25 years.
  • A 30 year amortization stretches those payments over 30 years instead.


You will renew your mortgage several times during that period, and your rate will almost certainly change, but the amortization is the overall timeline you are working with unless you make changes.


25 years vs 30 years: the basicS

In general:

  • Longer amortization (30 years)
  • Lower required monthly payments
  • More total interest paid over the life of the mortgage
  • Shorter amortization (25 years)
  • Higher required monthly payments
  • Less total interest paid
  • You become mortgage free sooner


That is the key trade off: monthly payment today vs total cost and debt timeline over the long term.


example: $500,000 mortgage

Let's look at a simple example.

  • Mortgage amount: $500,000
  • Interest rate: 4.50%
  • Amortization: 25 years vs 30 years


Approximate results

25 year amortization

  • Monthly payment: $2,767.36
  • Total interest over 25 years: $330,209.43


30 year amortization

  • Monthly payment: $2,521.08
  • Total interest over 30 years: $407,588.00


Important note: This assumes the interest rate stays the same for the entire amortization, which is very unlikely in real life because you would renew several times. It does, however, give a clean apples to apples comparison.

In this example:


Summary
  • The 25 year mortgage payment is $246.28 higher per month, which is about 9 percent higher.
  • Over the life of the mortgage, the 30 year option costs about $77,378 more in interest, which is roughly 23 percent more interest than the 25 year option.


So you save about $246 per month today with the 30 year, but pay over $77,000 more in interest if you follow that schedule all the way through.


How amortization affects how much you qualify for

One of the main reasons people choose a 30 year amortization is purchasing power.


Your maximum mortgage amount is based on how much of your monthly income can go toward your mortgage payment. If you stretch the payments over 30 years, the required monthly payment is lower for the same mortgage size, which means you may qualify for a larger mortgage at the same monthly payment limit.


Using the same rate as above and assuming the maximum payment you can afford is $2,500 per month:

  • With a 25 year amortization, you might qualify for roughly $450,000 of mortgage
  • With a 30 year amortization, you might qualify for roughly $495,000 of mortgage


Exact numbers will depend on the rate, your income, other debts, and the specific lender, but the idea is the same:

A 30 year amortization can increase your maximum purchase price because it lowers the required payment for a given mortgage amount.

So which should you choose?

Assuming you can qualify with either a 25 year or a 30 year amortization, here is a simple way to think about it.


Choose 25 years if:
  • You want the mortgage paid off sooner
  • You want to minimize the total interest you pay
  • You are comfortable with a higher required monthly payment


Choose 30 years if:
  • You prefer a lower required monthly payment
  • You want more room in your monthly budget or more flexibility
  • You are okay keeping the mortgage for longer and paying more interest overall


There is no one size fits all answer. It comes down to cash flow, long term goals, and your comfort level with debt.


My favourite approach: flexibility first, then pay it down

There is one more strategy that I almost always like to discuss with clients.


Most lenders (especially the ones I prefer to work with) allow you to make regular prepayments without penalty, as long as your extra payments stay within their annual limits (usually 15 to 20 percent of the original mortgage amount). These prepayments go directly toward principal and reduce your amortization.


Because of this, a powerful strategy is:

  1. Take the 30 year amortization to get the lowest required monthly payment
  2. Manually “shrink” the amortization by making prepayments when your cash flow allows


Back to our earlier example:

  • You take the 30 year mortgage with a required payment of $2,521.08 per month
  • You then make a prepayment of $246.28 per month (the difference between the 30 year and 25 year payment)


You would effectively bring your amortization back down to about 25 years anyway.

In other words, you get the flexibility of the 30 year payment on paper, but you behave as if you chose 25 years by paying extra.


A twist: invest the difference instead

Some clients prefer a different twist on this:

  • They take the 30 year amortization
  • Instead of prepaying the mortgage, they invest the difference


If your investments earn a higher rate of return than your mortgage interest rate, you can potentially come out further ahead over the long run.


This is more of an advanced strategy and it depends on:

  • Your risk tolerance
  • Your overall financial plan
  • Your time horizon


It is not for everyone, and you should get proper financial advice before using this approach. The main idea is that the lower required payment gives you choices.


Benefits of the “30 year plus prepayments” strategy

Here are a few reasons I like this approach.


1. Extra cash flow when you need it most

When you first buy a home, there are always lots of costs: closing costs, moving, furniture, small renovations and so on. Having a lower required payment and the option to pay extra can make those early months less stressful.


2. Helps with qualifying for future properties

If you ever want to buy a rental, a second home, or co sign for someone, your existing mortgage payment will count against you when you qualify.


A 30 year amortization gives you the lowest payment showing on paper, which can make it easier to qualify for that next property, even if you are actually paying more each month through prepayments.


3. You stay in control

You can increase or decrease your prepayments over time based on your income, expenses and goals, instead of being locked into a higher required payment every month.


If your income drops or an unexpected expense comes up, you can simply reduce or pause the extra payments and fall back to the lower required payment.


When a 25 year amortization still makes sense

The main downside to the 30 year plus prepayments strategy is that it relies on your own discipline.

If you know yourself and you are pretty sure you will not make those extra payments or invest the difference, then a 25 year amortization can be a great way to build forced savings.


The higher required payment guarantees that more money goes toward your mortgage every month, whether you are feeling motivated or not.


summary

  • 25 year vs 30 year amortization affects your payment size, total interest cost, and how long you keep the mortgage
  • A 30 year amortization gives you lower required payments and often higher borrowing power, but more interest over time
  • A 25 year amortization means higher payments, less interest, and becoming mortgage free sooner
  • A smart hybrid is to take 30 years on paper, then use prepayments to effectively act like a 25 year amortization
  • If you are not likely to make extra payments consistently, a 25 year amortization can be a better built in savings plan


Next steps

If you are choosing between 25 and 30 years, the best approach is to:

  1. Look at the actual monthly payments side by side
  2. Think about how much flexibility you want in your budget
  3. Decide whether you are realistically going to make prepayments or invest the difference


If you are not sure which option fits your situation best, feel free to reach out. I am happy to run the numbers with you and help you decide what makes the most sense for your goals.


Need help with your mortgage? Book a consultation or call 778-988-8409.


Glossary

Amortization
The total length of time it will take to fully pay off your mortgage if you follow the scheduled payments.


Amortization period
The specific number of years your mortgage is set to be paid off over, for example, 25 years or 30 years.


Interest
The cost you pay to borrow money from the lender, usually shown as a percentage rate on your mortgage.


Mortgage prepayment
Any extra amount you pay toward your mortgage on top of your regular required payment. This goes directly to principal and can shorten your amortization.


Principal
The amount of money you actually borrowed for your mortgage, not including interest.


Refinancing
Replacing your existing mortgage with a new one, often with a different rate, term, or amount, usually to lower payments, consolidate debt, or access equity.


Required monthly payment
The minimum mortgage payment your lender needs you to make each month to stay in good standing and follow your agreed amortization.


Total interest paid
The sum of all interest charges you will pay to the lender over the entire life of your mortgage if you follow the scheduled payments.

Tim Lyon

Mortgage Consultant

How Rental Income Impacts Your Mortgage Approval (And Why Lender Choice Matters)

By Tim Lyon • January 20, 2026
If you are buying a home with a suite, keeping your current home as a rental, or already own a rental property, mortgage qualification can get confusing fast. The frustrating part is that you can do everything “right” and still get very different answers depending on which lender you talk to. Here’s a simple breakdown so you understand it and don’t miss out. What are Debt Service Ratios? In Canada, lenders qualify you using two main ratios: Gross Debt Service (GDS) This looks at housing costs only , typically: Mortgage payment Property taxes Heating 50% of strata fees (if applicable) GDS typically needs to be 39% or less of your gross income. Total Debt Service (TDS) This includes everything in GDS , plus other debts like: Car loans Credit cards Lines of credit Student loans TDS typically needs to be 44% or less of your gross income. These ratios are the foundation. If they do not work, the lender will not approve the mortgage, even with strong credit and a solid down payment. How Lenders Treat Rental Income Most people assume lenders look at rental properties based on simple cash flow (rent minus mortgage payment). In reality, most lenders use one of two methods: 1) Addback A percentage of the rental income is added to your gross income for qualification purposes. 2)Offset A percentage of the rental income is subtracted from the mortgage payment tied to the rental property. Different lenders use different percentages and different worksheets. That is why the same borrower can qualify with one lender and fail with another. Benefits of Understanding Lender Methods When you understand how rental income is calculated, you can: Avoid being under-qualified by a lender with conservative rules Get a more accurate picture of your real purchasing power Choose a lender that fits your situation (instead of forcing your situation to fit the lender) Important Considerations A few key points to keep in mind: Rental income is rarely counted at 100% , but some lenders are more generous than others. The method matters just as much as the percentage (addback vs offset). If you own multiple properties, lender worksheets can change the result dramatically. Your lender choice is a strategy decision , not just a rate decision. Real-World Example: Same Clients, Two Very Different Outcomes Here’s an example comparing lenders Scotiabank and Strive, using a fictitious couple: Scenario Household income: $160,000 Existing townhome: $800,000 value with a $525,000 mortgage ( $2,500/month payment) Market rent for the townhome: $3,400/month New purchase: property with a rental suite generating $1,800/month Down payment: 10% Other debts: student loan $165/month , car loan $500/month How Scotiabank viewed it For the townhome rental, they counted half the rent and subtracted the mortgage payment, leaving an $800/month shortfall that gets added into the debt ratios. For the new purchase, 50% of the suite income gets added to income. Max mortgage : $650,700 Max purchase price : $723,000 How Strive viewed it For the townhome rental, Strive used a rental worksheet and calculated $5.20/month of income that can be added to the application. For the new purchase, 100% of the suite income gets added to income, and they did not need to include taxes or heat. Max mortgage : $878,400 Max purchase price : $976,000 The result That’s a $253,000 difference in purchasing power , with the same clients, same income, same debts, and same properties. The difference was lender policy. Quick Summary GDS and TDS ratios are the backbone of mortgage qualification. Rental income is usually counted using Addback or Offset , and each lender handles this differently. Two lenders can produce wildly different results, even with the exact same file. In the example above, lender choice created a $253,000 swing in purchasing power. Next Steps If you are planning to: Buy a home with a suite Keep your current home and convert it to a rental Use rental income to qualify Reach out and I will run the numbers across multiple lenders so you see what you actually qualify for, not just what one lender will allow. Need help with your mortgage? Book a consultation or call 778-988-8409 . Glossary Addback : A method where a lender adds a percentage of rental income to your gross income for qualification. Gross Debt Service (GDS) : The ratio that measures housing costs as a percentage of gross income. Offset : A method where a lender subtracts a percentage of rental income from the rental property’s mortgage payment for qualification. Total Debt Service (TDS) : The ratio that measures housing costs plus other debts as a percentage of gross income.

Mortgage Renewal vs. Refinance: Understanding the Key Differences

By Tim Lyon • November 25, 2025
If you own a property with a mortgage, you've probably heard the terms "renewal" and "refinance" thrown around. While both involve obtaining a new term for your mortgage, there are some important differences to understand. Let's break down what each one means and when you might use them. Understanding Mortgage Basics In Canada, when you take out a mortgage, the payments are typically spread over 25 to 30 years. This period is known as the amortization. However, unlike in the U.S., Canadians do not keep the same interest rate and payment terms for the entire amortization period. Instead, you have an initial term, usually 3 to 5 years, after which you need to renew into a new term. For example, if you have a 25-year mortgage with 5-year terms, you will need to renew your mortgage four times throughout its lifespan. It's also common to have a mix of different term lengths over the course of your mortgage. What is a Mortgage Renewal? A mortgage renewal occurs at the end of your mortgage term. When you renew, you start a new term with a new interest rate while keeping the remaining details of your mortgage the same. The key element here is that the mortgage charge registered on your property's title remains unchanged. A renewal is straightforward and typically does not involve any significant changes to your mortgage agreement other than a new interest rate. Think of it as hitting the "continue" button on your mortgage, but at new rates. What is a Mortgage Refinance? A mortgage refinance is different. When you refinance, you are making changes to your original mortgage agreement. This means paying off your existing mortgage and registering a new one on your property's title. Essentially, you are taking out a completely new mortgage for the same property. People commonly refinance to: Access the equity in their home for investments or major purchases Consolidate high-interest debt into their lower-rate mortgage Extend the amortization period to reduce monthly payments and improve cash flow Make significant changes to their mortgage structure It's important to note that refinancing is not allowed for insured properties (those with less than a 20% down payment at purchase). This means the maximum loan amount in a refinance is 80% of your property value. What About Switching Lenders? If you want to keep everything the same but switch lenders for a better rate, this is known as a transfer. A transfer is a type of renewal where the original mortgage charge is transferred from one lender to another. Depending on the lenders involved, you might be able to make minor changes (like extending the amortization or changing borrowers) without needing a full refinance. Why Timing Matters Your mortgage maturity date is when your current term ends. This is the ideal time to either renew or refinance. If you refinance or switch lenders before the maturity date, you will face a prepayment penalty. If you refinance, renew or transfer at maturity, there is no penalty. Real-World Example A homeowner with a $450,000 mortgage is reaching the end of their 5-year term. Their lender offers a renewal rate, but they also have $40,000 in high-interest credit card debt. Option 1: Renewal They accept the new term. Their mortgage stays the same. Their debt remains separate at high interest rates. Option 2: Refinance at Maturity They consolidate the credit card debt into the new mortgage. Their total monthly payments drop significantly, even after accounting for the new mortgage balance. In this situation, refinancing provides better cash flow and a simpler payment structure. Quick Summary Mortgage Renewal: Starts a new term for your existing mortgage Mortgage charge on your title stays the same Keeps all other terms the same aside from interest rate Can switch lenders at renewal through a transfer No penalty when done at maturity Mortgage Refinance: Pays off current mortgage and creates a new one New mortgage charge registered on your title Often resets the amortization period Can access equity or make structural changes Maximum 80% of property value for uninsured mortgages Incurs penalty if done before maturity Next Steps Understanding the difference between renewal and refinance helps you make informed decisions about managing your mortgage. If you have a renewal coming up or are considering accessing your home equity, now is a good time to explore your options. Whether you're looking to renew, refinance, or switch lenders, I'm here to help you navigate the process and find the best solution for your situation. Need help with your mortgage? Book a consultation or call 778-988-8409 . Glossary Amortization: The total time period over which you'll pay off your mortgage, typically 25-30 years in Canada. Insured Mortgage: A mortgage where the down payment was less than 20%, requiring mortgage default insurance to be added. Maturity Date: The end date of your current mortgage term, when you need to renew or refinance. Mortgage Charge: The legal registration of your mortgage on your property's title. Pre-payment Penalty: A fee charged by your lender if you pay off your mortgage before the end of your term. Refinance: Replacing your existing mortgage with a new mortgage, often with different terms or to access equity. Renewal: Starting a new term for your existing mortgage, typically just updating the interest rate. Term: The length of time your current mortgage contract is in effect, typically 3-5 years in Canada. Transfer: Moving your mortgage from one lender to another at renewal without changing other terms.