Key takeaways
- →Canadian fixed-rate mortgages are compounded semi-annually, not monthly — a calculation that ignores this convention will produce a slightly wrong payment figure even with the right rate and balance.
- →On an illustrative $500,000 balance at 5%, moving from a 25-year to a 30-year amortization lowers the monthly payment by roughly $240, but adds roughly $88,000 in interest over the full life of the mortgage.
- →Over a single 5-year term, the interest-cost gap between amortization lengths is far smaller than the lifetime figure suggests — most of the extra lifetime interest comes from years far beyond any one term.
- →The 30-year option is only available on insured mortgages to first-time buyers and buyers of newly constructed homes since December 2024 — this article is the payment math, not the eligibility rules.
Every broker can say correctly that a longer amortization means a lower payment and more total interest. Far fewer can say by how much, on an actual balance, calculated the way Canadian law actually requires mortgage interest to compound — which is different from the monthly-compounding assumption most online calculators default to.
Here's the comparison done properly: 20, 25, and 30-year amortizations on the same illustrative $500,000 balance at an illustrative 5% rate, both over the full life of the mortgage and over a single term. For who actually qualifies for the longer end of that range, see 25-year vs. 30-year amortization in Canada — this piece is the payment math specifically.
01 · Why does it matter that Canadian mortgages compound semi-annually?
Canadian law requires fixed-rate mortgage interest to be calculated not in advance and compounded no more than semi-annually, even though payments are made monthly, bi-weekly, or weekly. That's a different convention from simple monthly compounding, and it changes the effective monthly rate used in the payment formula — a calculation that skips this step will land close to, but not exactly at, the number a Canadian lender actually charges.
The examples below apply that convention: the nominal annual rate is compounded semi-annually, then converted to an equivalent monthly rate before the payment is calculated — the way a Canadian amortization schedule is actually built.
02 · What does the payment and total interest actually look like at 20, 25, and 30 years?
On an illustrative $500,000 mortgage balance at an illustrative 5.00% fixed rate, compounded semi-annually per the convention above:
| Amortization | Monthly payment | Total paid over full amortization | Total interest over full amortization |
|---|---|---|---|
| 20 years | $3,285.63 | $788,550.04 | $288,550.04 |
| 25 years | $2,908.02 | $872,407.48 | $372,407.48 |
| 30 years | $2,668.45 | $960,643.22 | $460,643.22 |
The gap between 25 and 30 years: about $240 less per month, but roughly $88,000 more in interest paid over the full life of the mortgage. The gap between 20 and 30 years is starker still — about $617 less per month, against roughly $172,000 more in lifetime interest.
03 · Does the interest gap look the same over just one 5-year term?
No — and this is the number worth showing a client who's fixated on the lifetime total. Measured over just the first 5-year term rather than the full amortization, the interest-cost gap between amortization lengths narrows considerably, because the lifetime totals above are driven mostly by interest paid in years far beyond any single term a client is actually committing to right now:
| Amortization | Balance remaining after 5 years | Interest paid in the first 5 years |
|---|---|---|
| 20 years | $416,892.01 | $114,029.52 |
| 25 years | $442,537.54 | $117,019.03 |
| 30 years | $458,808.55 | $118,915.75 |
Across the first term, the difference between the shortest and longest amortization here is under $5,000 in interest — a fraction of the roughly $172,000 lifetime gap. Both numbers are true; they answer different questions. The lifetime total answers “what does this cost if nothing ever changes,” and the per-term number answers “what does this cost by the time I'm renewing and can revisit the decision anyway.”
Show the real numbers, not the rule of thumb
Run the exact payment and interest math on every client's actual file.
Treadstone's fulfillment associates build the amortization comparison into every proposal — on the client's real balance and rate, compounded the way a Canadian lender actually calculates it.
04 · How should a broker run this comparison on an actual client's numbers?
- 01Use the client's actual approved balance and contract rate, not a round number — the shape of the comparison holds, but the exact dollar gap moves with both inputs.
- 02Compound the rate semi-annually before converting to a monthly figure, not monthly directly, to match how a Canadian lender will actually calculate the payment.
- 03Show both the lifetime total and the single-term total side by side, since they answer different questions a client is actually asking, whether or not they've phrased it that way.
- 04Confirm eligibility for the amortization length being compared — the 30-year option specifically is restricted to insured mortgages for first-time buyers and new builds, not available to every borrower who wants a lower payment.
Frequently asked questions
This article is general information to help you scale — not a substitute for tailored advice on your specific business, licensing, or compliance obligations. All figures are illustrative examples for planning purposes; actual costs vary by province, market, and brokerage.