Mortgage Education

A fixed-rate mortgage locks in your interest rate for the entire term (typically 1–5 years). Your payment never changes, which makes budgeting simple and predictable. Fixed rates are currently popular in Canada due to rate uncertainty.

A variable-rate mortgage fluctuates with the Bank of Canada's prime rate. When rates fall, your payment may decrease; when they rise, your payment increases. Variable rates have historically been lower over the long term, but come with more risk in volatile rate environments.

For most London Ontario buyers in the current environment, a fixed 3- or 5-year term offers a good balance of security and rate.

Amortization is the total length of time it takes to pay off your mortgage — typically 25 or 30 years in Canada.

A shorter amortization means higher monthly payments but significantly less interest paid over the life of the loan. A longer amortization reduces monthly payments but costs more in total interest.

As of 2024, Canada now allows 30-year amortizations for first-time buyers purchasing a new build. For most existing homes, 25 years remains the maximum with an insured mortgage (under 20% down).

Before approving your mortgage, Canadian lenders must verify you can afford payments at a higher rate than you'll actually pay — this is the "stress test."

In 2026, the qualifying rate is the greater of: (a) your contracted rate plus 2%, or (b) 5.25%. So if you're getting a 5.5% mortgage, you'll be tested at 7.5%.

This reduces the maximum home price you can qualify for, but it protects buyers from overextending if rates rise. Talk to a mortgage professional to understand your exact qualification amount.

If your down payment is less than 20% of the home's purchase price, you're required by Canadian law to purchase mortgage default insurance through CMHC, Sagen, or Canada Guaranty.

The insurance premium is added to your mortgage balance. Premium rates range from 2.8% to 4.0% of your mortgage amount depending on your down payment percentage.

While it's an added cost, insured mortgages often come with slightly lower interest rates than uninsured mortgages — because the lender's risk is reduced.

This is one of the most misunderstood concepts: your term and your amortization are different things.

Amortization is how long it takes to fully pay off the mortgage (e.g., 25 years). Your term is how long your current rate agreement lasts — typically 1 to 5 years. At the end of each term, you renew at whatever rate is current.

When your term expires, you're free to switch lenders without penalty, which is a great opportunity to shop for better rates.