Is a shorter or longer amortization better?

Shorter amortization means higher payments but far less total interest. A 20-year vs 25-year amortization on $500K at 5% saves over $90,000 in interest.

Should I choose a 1-year or 5-year term?

Shorter terms offer more rate flexibility but higher renewal risk. The 5-year fixed is the most popular in Canada, providing certainty for half a decade.

What happens at renewal if rates have risen?

You renew at current market rates and must pass the stress test. Shop around 4 months before renewal — you can switch lenders without penalties.

Canadian Mortgage Comparison Calculator

Compare fixed vs variable, different terms and amortization periods side-by-side with correct Canadian semi-annual compounding.

Mortgage Amount (CAD)

Option A

Type

Interest Rate

Term

Amortization

Option B

Type

Interest Rate

Term

Amortization

Comparison Over 3-Year Term

CA$4,947 difference

Option B pays less interest over the common term

Option A

Monthly PaymentCA$2,934

Total Interest (full amort)CA$380,108

Interest paid this termCA$73,236

Balance at term endCA$467,623

Option B

Monthly PaymentCA$2,837

Total Interest (full amort)CA$351,183

Interest paid this termCA$68,289

Balance at term endCA$466,147

Monthly difference: CA$96 (Option B is lower). All rates use Canadian semi-annual compounding as required by the Interest Act.

How to Compare Canadian Mortgages

Enter your Mortgage Amount, then set the rate, term, and amortization for each option. The calculator compares payments, total interest, and the interest paid over the shorter of the two terms — giving you an apples-to-apples comparison even when terms differ.

All calculations use Canadian semi-annual compounding as required by the Interest Act. This differs from US calculators that use monthly compounding.

Fixed vs Variable: The Key Trade-off

Fixed-rate mortgages lock your rate for the term (1-10 years). You pay a premium for certainty — fixed rates are typically higher than variable rates. The main advantage: predictable payments and protection from rate increases. The main disadvantage: higher break penalty (IRD) if you need to exit early.

Variable-rate mortgages float with the lender's prime rate. When prime falls, more of your payment goes to principal; when prime rises, less does. Most variable-rate mortgages have fixed payments with the rate embedded — so rising rates extend your amortization. Break penalty is typically only 3 months interest (much lower than IRD).

Example: 5-Year Fixed vs 3-Year Variable

$600,000 Mortgage — Toronto

	5-yr Fixed 5.09%	3-yr Variable 4.65%
Monthly Payment	$3,505	$3,353
Monthly Savings (variable)	—	$152/month
Interest over 3 years	$87,200	$80,700
Balance after 3 years	$553,700	$551,300
Break penalty	IRD (~$15,000)	3-month interest (~$6,500)

The variable rate saves $6,500 in interest over 3 years, but the much lower break penalty also matters — if the homeowner sells in year 2, variable wins significantly.

Frequently Asked Questions

A shorter amortization means higher monthly payments but dramatically less total interest. A 20-year amortization on a $500,000 mortgage at 5% saves over $90,000 in interest vs. 25 years. Choose the shortest amortization your budget comfortably allows, and use any extra cash flow for RRSP or TFSA investments.

Historically, shorter terms have often been cheaper — but with more renewal risk. A 5-year term provides certainty for half a decade. If you expect rates to fall significantly (as happened in 2023-2025), short terms let you capture lower rates sooner. If you expect rates to rise, lock in long. The 5-year fixed is the most popular choice in Canada.

At renewal you must qualify at the current stress test rate (contract rate + 2% or 5.25%). If rates have risen significantly, your renewal payment will be higher. You can usually switch lenders at renewal without a penalty — so shop around 4 months before your renewal date.