30-Year Mortgage in Canada: Everything You Need to Know

The Canadian dream of homeownership often hinges on securing the right mortgage. For many, that means a 30-year mortgage – a commitment that feels exciting and daunting at the same time. But considering today’s market, understanding the 30 year mortgage in Canada is more crucial than ever.

This post breaks down everything you need to know about this mortgage (from pros/cons to eligibility requirements) to help you make the best decision for your financial future.

How Does a 30-Year Mortgage Work?

When reviewing your options on how to get a mortgage, you must have found this one intriguing. In the Canada 30-year mortgage, you will pay the home loan over 30 years with the flexibility of shorter term lengths (1-5 years) within that period.

However, the long amortization period will affect the payment structure, resulting in lower monthly payments but higher overall interest costs. Compared to shorter mortgage terms like 25-year or 15-year mortgages, a 30 year mortgage offers lower monthly payments but accumulates more interest over the life of the loan.

Pros and Cons of a 30-Year Mortgage

While the 30 year mortgage in Canada makes homeownership more accessible, it comes with drawbacks that applicants need to consider:

* With new rules effective December 15, 2024, first-time or newly-built buyers are eligible for a 30-year amortization with an insured mortgage. Visit Canada.ca for more details on 30 year mortgages for first-time buyers of new builds.

** Every 30 year mortgage in Canada is uninsured, so you won’t be limited by CMHC rules such as the $1 million purchase price limit.

Eligibility for a 30-Year Mortgage in Canada

Can you get a 30 year mortgage in Canada? Here are the application requirements:

• Down Payment: A minimum 20% down payment is typically required for uninsured mortgages. As of December 15th, 2024, first-time homebuyers or those purchasing newly built homes may qualify with a down payment as low as 5%.
• Credit Score: A credit score of 680 or above is generally required to qualify for the best rates. Some lenders may accept scores between 600 and 680 as well but with higher interest rates. (Also read: minimum credit score for a mortgage)
• Income: Stable income is necessary to cover mortgage payments, property taxes, and heating costs.
• Debt Service Ratios: You need to meet the debt service ratio to show manageable levels of debt compared to income. Lenders typically use up to 35% of gross income for servicing costs on uninsured mortgages and up to 39% for insured mortgages.
• Mortgage Stress Test: You must pass the stress test to qualify for higher interest rates (typically 5.25% or the posted rate plus 2%).
• Property Value: For an insured 30-year mortgage in Canada, the property’s evaluations must be under $1 million.
• Residency Status: For insured mortgages, you need to confirm your status as a first-time homebuyer and verify that you have never purchased a home before.

While there is 30 year fixed mortgage rate in the U.S. (currently 6.72%), Canadian mortgage lending is characterized by five-year terms, full recourse for lenders, and portability. So, borrowers face refinancing risk due to fluctuating interest rates.

Tight regulation, limited securitization, and government influence through mortgage insurance have resulted in stricter lending practices and lower default rates. So, while the riskier U.S. model may include exotic mortgages, Canada is leaning more toward systemic stability and safety.

How to Get a 30-Year Mortgage in Canada

After assessing your down payment, checking your credit score, evaluating your income, and calculating your debt service ratio, explore mortgage options by contacting prime lenders (start with the Big Six Banks), consider alternative lenders, and inquire about insured mortgages.

Then collect all necessary financial documents, complete the application with your chosen lender, and secure the Canadian 30 year mortgage pre-approval.

Frequently Asked Questions          

- Does RBC offer 30-year mortgages?

Yes, RBC Royal Bank does offer mortgages with amortization periods of up to 30 years.

- Why is there no 30-year fixed mortgage in Canada?

The absence of the Canadian 30 year fixed mortgage is mainly due to the structure of the Canadian financial and regulatory system, which is significantly different from the U.S.

Canadian regulations, funding market dynamics, and consumer demand collectively contribute to the rarity of long-term fixed-rate mortgages.

- Does CMHC allow 30-year amortization?

CMHC allows a 30-year amortization period for insured mortgages. To qualify, you need to be a first-time buyer, which is defined as someone who has never owned a home, has not occupied an owned home in the last 4 years, or has recently experienced a marital breakdown. The property must be newly constructed and never previously occupied too.

- Should I get a 25-year or 30-year mortgage?

A 25-year mortgage will cost you less in the long run but has higher monthly payments. 30 year mortgage in Canada does not have this problem, but its total interest is higher. Ultimately, it depends on your financial situation and long-term goals.

The Bottom Line

What is the longest mortgage term in Canada? Well, there is no maximum amortization period for uninsured mortgages. However, in 2008, the Federal Government reduced the amortization to 35 years, and later to 30 years in 2011 and 25 years in 2012.

The maximum amortization on insured mortgages is 25 years now, so it is more common and popular. But as mentioned, now first-time buyers can choose a 30 year mortgage in Canada with a beautiful balance between pros and cons.