Canadian Mortgage Basics (2025 Guide)
Mortgages are one of the biggest financial commitments Canadians make. Understanding how they work — rates, terms, amortization, CMHC rules — can save you thousands of dollars. This guide explains everything you need to know.
What Is a Mortgage?
A mortgage is a loan used to buy a home or property. In Canada, mortgages are structured as secured loans, meaning the property is collateral. Most mortgages are paid back through regular payments (monthly or bi-weekly) over a long period — typically 25 years.
To estimate your mortgage payment instantly, use the Mortgage Calculator.
Mortgage Terms vs. Amortization
A lot of first-time buyers get confused between the two. They are different:
Mortgage Term
The term is the length of time your interest rate and mortgage contract are locked in.
- Common terms: 1, 2, 3, or 5 years
- After your term ends, you renew your mortgage
Amortization Period
This is the total time needed to fully repay the mortgage, usually:
- 25 years (standard with CMHC insurance)
- 30 years (for uninsured mortgages)
Amortization has a huge impact on monthly payments. Try different scenarios using the Mortgage Calculator.
Fixed vs. Variable Mortgage Rates
In Canada, mortgages come in two main types:
Fixed Rate Mortgage
- Your rate stays the same during the term
- Predictable payments
- Most popular in Canada
Variable Rate Mortgage
- Rate changes based on prime rate
- Lower initial rates
- Payments or amortization may adjust
If you want to see how interest rate changes affect monthly payments, try: Loan Payment Calculator.
Down Payment Requirements in Canada
| Home Price | Minimum Down Payment |
|---|---|
| Up to $500,000 | 5% |
| $500,000–$999,999 | 5% of first $500k + 10% of remainder |
| $1M+ | 20% (no CMHC insurance allowed) |
You can calculate the impact of your down payment using: Mortgage Calculator.
What Is CMHC Mortgage Insurance?
If your down payment is less than 20%, CMHC mortgage insurance is required. It protects the lender — not the borrower — but it allows Canadians to buy a home with a lower down payment.
- Applies to homes under $1 million
- Premium is added to your mortgage amount
A higher down payment reduces your CMHC premium and interest costs.
Example: $600,000 Home, 10% Down Payment
| Item | Amount |
|---|---|
| Home Price | $600,000 |
| Down Payment (10%) | $60,000 |
| Mortgage Amount | $540,000 |
| CMHC Premium | ≈ $20,000 |
Try your own numbers in the Mortgage Calculator.
How Mortgage Payments Are Calculated
Monthly mortgage payments combine both interest and principal. Early payments are mostly interest, while later payments focus more on principal.
You can visualize this using: Loan Calculator or Debt Payoff Calculator.
Fixed vs. Variable Example (2025 Rates)
| Mortgage | Rate | Monthly Payment |
|---|---|---|
| $500,000 @ Fixed | 5.2% | ≈ $2,980 |
| $500,000 @ Variable | 4.7% | ≈ $2,850 |
FAQ: Canadian Mortgage Basics
What is the most common mortgage in Canada?
The 5-year fixed-rate mortgage is the most popular.
Is 20% down payment required in Canada?
No — you can buy with as little as 5% down (unless the home is over $1M).
Is it better to go variable or fixed?
It depends on your risk tolerance and the interest rate environment.
How do I lower my mortgage payment?
Extend amortization, refinance, or negotiate a better rate.
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- Debt Payoff Calculator
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Final Thoughts
Mortgages can seem complicated, but once you understand the basics — rates, terms, amortization, down payments, and CMHC insurance — the process becomes much easier. Use LoanCalc.ca calculators to compare scenarios and make confident financial decisions.