How Canadian mortgages work
Canadian mortgages have a unique structure. The amortization period (typically 25 years, up to 30 for non-insured loans) is how long it takes to repay the full loan. The term (typically 5 years) is how long your current rate and conditions are locked in. At the end of the term, you renew with a new rate and term until the loan is fully amortized. The 5-year fixed is the most popular product.
The stress test
Federally regulated lenders must qualify borrowers at the higher of (a) the contract rate plus 2%, or (b) the Bank of Canada benchmark qualifying rate — around 5.25%. This stress test means you can typically afford less house than the headline rate suggests. Provincial credit unions may be exempt.
Down payments and CMHC insurance
Minimum down payment is 5% on the first C$500,000 and 10% on the portion above, up to C$1.5 million. Down payments under 20% require mortgage default insurance through CMHC, Sagen, or Canada Guaranty — typically 2.8–4.0% of the loan amount, added to the mortgage. Larger down payments avoid insurance entirely.
Worked example
Borrowing C$500,000 at 4.79% over a 25-year amortization gives a monthly payment of around C$2,851. Over a 5-year term you'd pay about C$171,000, of which roughly C$110,000 is interest and C$61,000 is principal. At renewal, you'd negotiate a new rate on the remaining balance.
Frequently asked questions
Is the 5-year fixed always best in Canada?
What is CMHC insurance?
How does renewal work?
Can I prepay my Canadian mortgage?
Estimates only. Confirm with your lender or a licensed broker. Not financial advice.