Can you get a 25-year fixed mortgage in Canada?
A 25-year term is the longest available in Canada, but comes with much higher rates than a more traditional term length, like a 5-year mortgage. As a result, it is not an especially popular term - just 0.5% of all mortgage requests made on Ratehub.ca from January to September 2023 were for 25-year fixed-rate mortgages.
A 25-year fixed mortgage rate means your interest rate is locked in for 25 years. It's the longest mortgage term available in Canada, and RBC Royal Bank is the only lender that currently offers this term.
While some Canadian lenders do offer fixed-rate terms for as long as 25 years, a five-year term is far more common in Canada. While some Canadian lenders offer the stability of a 25-year fixed-rate mortgage, they come at a much higher carrying cost.
The maximum mortgage amortization period is 25 years for CMHC insured mortgages and 35 years for non-CMHC insured mortgages. A CMHC mortgage is generally one where the home purchaser has a down payment of less than 20% of the purchase price.
A 25-year mortgage is a term you might not typically see. With a 25-year fixed, you'll pay off your home loan over 25 years instead of the standard 15 or 30 years. Since it's a fixed mortgage, you can count on the same principal and interest rate for the life of the loan.
This is primarily because CMHC only offers mortgage default insurance coverage for mortgages with a maximum amortization period of 25 years. Essentially, it's not that you can't get a 30-year mortgage; it's just much harder to do so and impossible if you're not planning to put down a minimum 20% downpayment.
Most big banks in Canada do not offer 35-year mortgages, making alternative lenders the primary source for this type of mortgage. Alternative lenders may include credit unions, B-lenders, or private lenders. Mortgage brokers can help you get a 35-year mortgage.
Mortgage amortization
The amortization is an estimate based on the interest rate for your current term. If your down payment is less than 20% of the price of your home, the longest amortization you're allowed is 25 years.
Canada's major banks do not offer 40-year mortgages. To get a 40-year mortgage, you'll need to go with an alternative lender, such as a private mortgage lender. Equitable Bank also offers 40-year mortgages with a third-party lender.
With current interest rates on a $70,000 salary, you can afford a home with a maximum property price of approximately $287,000 with 5% down and $302,000 with 20% down. To illustrate how much you can afford with a $70,000 salary and good credit, we used nesto's mortgage affordability calculator.
Can I get a 20 year mortgage in Canada?
And while some Canadian lenders do offer fixed-rate terms for as long as 25 years, they come at a much higher interest rate. More common in Canada is the five-year fixed-rate mortgage based on a maximum 25-year amortization rate. Canadians are more likely to find longer fixed-rate mortgage terms of up to 10 years.
Assuming you have no debt, a healthy down payment and have been offered a low interest rate, you might be able to purchase a home worth six times your income. A 4% interest rate, $100,000 income and a $50,000 down payment, for example, might allow you to afford a home worth around $617,000.
With a fixed–rate mortgage, you'll always know what your monthly principal and interest payments will be. You can choose a 10–, 15–, 20–, 25– or 30–year term for fixed-rate mortgages. An adjustable-rate mortgage (ARM) offers a lower rate for a set number of years at the start of the loan.
Typically, this is either: Your age when you take out a new mortgage, with the limit ranging from around 65 to 80. Your age when the mortgage term ends, with the limit ranging from about 70 to 85.
As long as your finances are in order and the property you're looking to buy is sound, getting a mortgage in your 50s shouldn't be too much trouble. There are plenty of mortgage providers who are prepared to lend to people in their 50s and you can usually get a 25-year term.
You can get a 30-year mortgage in Canada, but you will need at least a 20% deposit in order to avoid having to get CMHC insurance. While a 30-year mortgage might seem like a more affordable option, it can cost you more over time and will require more money up front.
The standard mortgage in Canada isn't the 30-year fixed, as it is in the U.S., but a five-year mortgage amortized over 25 years. That means the loan balance has to be refinanced at the end of five years, exposing the borrower to any increase in rates that has occurred in the interim.
As of February 2024, the market consensus on the mortgage rate forecast in Canada is for the Central Bank to hold the prime rate at 5% at its March 6, 2024 meeting and cut rates by 0.25% at its April 10 meeting.
Central Bank's Policy Rate Projections
The Bank, aiming to balance economic growth and inflation, is expected to adjust this rate as economic conditions evolve. Predictions suggest a potential decrease in the key interest rate starting in the second half of 2024, with gradual reductions thereafter.
The BoC Policy Rate increased by 75 basis points (1 basis point is equal to 0.01%) in 2023. A range of predictions from the Big 6 Banks in Canada so far indicate that interest rates should start to decrease mid-2024 by 25-50 basis points and close out the year with a decrease between 100-175 basis points.
Does Canada have 15 year mortgages?
15-year fixed mortgages in Canada
The 15-year fixed mortgage rate is one of them, and means that your interest rate is locked in for a full 15 years. It's very rare for a borrower to choose a 15-year fixed mortgage since a minority of people under the age of 50 remain in their home for that long.
Age doesn't matter. Counterintuitive as it may sound, your loan application for a mortgage to be repaid over 30 years looks the same to lenders whether you are 90 years old or 40.
In Canada, it's illegal for a mortgage lender to decline an application based solely on age. In fact, seniors can apply for any type of mortgage just like anyone else.
Lenders in Canada are now seeing 60-, 70-, even 90-year mortgages as Canadians struggle with rocketing interest rates.
However, once the mortgage is on their books, lenders can take the liberty to extend it further if need be – even decades longer, reaching lengths of 70, 80, or 90 years.
