How 30-Year Amortizations Help First-Time Homebuyers in Canada Enter the Market

Introduction

To improve housing affordability, the Canada Mortgage and Housing Corporation (CMHC) reintroduced 30-year amortization periods for insured mortgages back on December 15, 2024. This change is a game-changer for first-time homebuyers (FTHBs), especially those with less than a 20% down payment. Spreading mortgage payments over 30 years instead of the previous 25-year cap, reduces monthly payments and increases borrowing power. This makes homeownership more attainable for many Canadians.

First-Time Homebuyers Are Taking Advantage

The impact of this policy shift was immediate. CMHC reported a 37% increase in insured mortgage volume in Q1 2025. By mid-2025, volumes had risen by 28% year-over-year, demonstrating how the extended amortization option is helping more Canadians, particularly younger buyers, enter the housing market sooner.

A Brief History of Amortization Period Changes

Mortgage amortization rules have evolved over the years, with CMHC making several changes in response to market conditions and concerns about household debt:

• Pre-2008: Insured mortgages could extend up to 40 years (briefly introduced in 2006).
• 2008-2011: First reduced to 35 years, then to 30 years.
• 2012: Post-financial crisis, CMHC capped amortization at 25 years for insured mortgages, aiming to curb rising household debt.
• 2024: Initially expanded to new builds in April, then extended to all first-time homebuyers and new-build purchasers as of December 15.

While the 30-year amortization option does lead to concerns about the long-term interest costs, they have been available for most of CMHC’s history of providing mortgage insurance.

Benefits of a 30-Year Amortization

The benefits of a longer amortization period are several: 

Lower Monthly Payments: By spreading the total mortgage amount over 30 years instead of the standard 25 years, each monthly payment is smaller. This frees up cash flow for other essential expenses like utilities, maintenance, or savings.

Improved Affordability and Qualification: Lower monthly payments mean FTHBs may find it easier to meet the stress test requirements and qualify for a mortgage in general. It may also enable them to qualify for a larger loan amount, giving them access to more expensive properties or homes in more desirable locations they might have been priced out of with a 25-year limit.

Financial Flexibility:  A longer amortization provides more flexibility in managing household finances. While the scheduled payments are lower, borrowers can choose to make lump-sum payments or increase their regular payments (depending on the mortgage terms) when their financial situation improves, effectively paying off the mortgage faster and mitigating the extra long-term interest costs.

Access to Insured Mortgages: The 30-year insured mortgage option helps new buyers afford a mortgage with a low down-payment of only 5% or more. Insured mortgages typically have lower interest rates than uninsured mortgages. This helps affordability for FTHBs who have smaller down payments.

The monthly payment savings from an insured mortgage can be material. 

Example Scenario

Mortgage Amount: $500,000
Interest Rate: 3.84% for a 5-year fixed-rate, insured mortgage

Buying power refers to the additional amount a buyer could borrow while maintaining the same monthly payment. In this scenario it is roughly 9-10% more.

This $255 monthly savings can be redirected toward renovations, emergency funds, or other life expenses. In high-cost markets like Toronto or Vancouver, it could mean the difference between qualifying for a condo or being priced out entirely.

The Trade-Off: More Interest Over Time

While a 30-year amortization produces lower monthly payments, the total interest paid over the life of the mortgage increases.

From our example:

25-Year Total Payments = $776,880 → Interest: $276,880
30-Year Total Payments = $840,720 → Interest: $340,720

The extra interest paid is $63,840 if the mortgage is held for the full amortization period.

Also note that your home equity builds more slowly in the early years with a 30-year amortization.

How to Offset the Cost

• Prepayments: Most lenders allow annual lump-sum payments of 15-20% or doubled monthly payments without penalties. Taking advantage of these opportunities will lower your remaining amortization and reduce interest costs over time.
• Amortization Adjustments: As your income grows over time, you can switch to shorter amortization periods at mortgage renewal.
• Payment Increases: Many lenders permit borrowers to increase monthly payments by 10-20%, helping accelerate principal repayment. Another option is to change to bi-weekly or weekly payments. This won’t increase your total monthly payment amount but will reduce your amortization more quickly.

First-time buyers can use the flexibility of a 30-year amortization period to initially afford homeownership and then ramp up payments over time, often paying off their mortgage in 20-25 years.

Is a 30-Year Amortization Right for You?

For first-time buyers navigating Canada’s competitive housing market in 2025, a 30-year amortization option presents an opportunity. It lowers entry barriers and boosts affordability, while allowing flexibility to adjust repayment strategies as financial situations evolve.

With home prices declining in many markets across Canada and supply increasing, there are buyer’s market opportunities, depending on your location. This combined with lower rates today and the 30-year amortization have greatly improved affordability. If you are considering entering the market it is worth looking into the numbers. They may work for you today much better than they have in the past.

Before making a decision it’s essential to run the numbers and consider your long-term financial goals. While the 30-year amortization offers immediate relief, it’s important to understand the implications of paying more interest over time.

At Frank Mortgage, we provide personalized side-by-side mortgage scenarios using real-time rates to help you make informed decisions. Ready to explore your options? Visit frankmortgage.com, call us at 1-888-850-1337 or DM @FrankmortgageCA to have us run the numbers for you for free.

Let’s get you home sooner.