Last reviewed: 3 October 2026
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Fixed vs. variable, term and amortization in Canada
A Canadian mortgage has two different time periods and, usually, a choice of interest rate type. This page sets out how the Financial Consumer Agency of Canada (FCAC) describes each. It gives no rates and does not say which structure to choose.
What this term means: in Canada, the mortgage term is the time your mortgage contract is in effect (from a few months to 5 years or more), and the amortization period is the time it takes to pay your mortgage, an estimate based on your current term’s interest rate.[1]
Term and amortization
| Mortgage term | Amortization period | |
|---|---|---|
| What the FCAC says it is | The time your mortgage contract is in effect. Terms may range from a few months to 5 years or more.[1] | The time it takes to pay your mortgage; an estimate based on your current term’s interest rate.[1] |
| What happens at the end | You must renew your mortgage, unless you pay the balance. You will likely need multiple terms to repay it.[1] | The FCAC illustrates a $300,000 mortgage with a 5-year term and a 25-year amortization: years 1 to 5 are the term and years 1 to 25 are the amortization.[1] |
| What it affects | The FCAC says the term and amortization period together affect your overall costs, your interest rates and the amount of your regular payments, and that the length of the term may affect your interest costs and the prepayment penalty if you break the contract.[1] | The FCAC says a longer amortization lowers payments but means you pay more in interest.[1] |
| Limits stated by the FCAC | The FCAC describes short-term (5 years or less), long-term (more than 5 years) and convertible terms, below.[1] | If the down payment is under 20%: 30 years for a first-time buyer and/or a new build, 25 years otherwise. If it is over 20%, the lender sets the maximum.[1] |
Kinds of term
- Short-term (5 years or less). The FCAC says most Canadian mortgage holders have one. You renew sooner, and may choose a fixed or a variable rate.[1]
- Long-term (more than 5 years). You keep the contract conditions longer. The FCAC says you may only have the option of a fixed interest rate, the interest rate is set for a longer period, and you may pay a substantial prepayment penalty if you sell within the first 5 years.[1]
- Convertible. A short-term mortgage that the lender may convert into a long-term mortgage; when the lender converts or extends it, the interest rate changes.[1]
Fixed, variable and hybrid interest rates
| Fixed rate | Variable rate | Hybrid or combination | |
|---|---|---|---|
| How the FCAC describes it | Stays the same for the entire term.[2] | May change during the term. Lenders may offer a rate of “prime plus” a percentage; in the FCAC’s example, if the prime rate moves from 3.5% to 3.7%, a rate of prime plus 1% moves from 4.5% to 4.7%.[2] | Part of the interest rate is fixed and the other part is variable. Each portion may have different terms.[2] |
| Payments | Payments stay the same for the entire term.[2] | Either fixed payments or adjustable payments; see below.[2] | The fixed portion gives partial protection if rates go up; the variable portion gives partial benefits if rates fall.[2] |
| Other points from the FCAC | The FCAC says fixed rates are usually higher than variable rates.[2] | The FCAC says a variable rate may be lower than a fixed rate; it also says rises and falls in rates are difficult to predict.[2] | The FCAC says hybrid mortgages may be harder to transfer to another lender.[2] |
Two payment structures with a variable rate
| Fixed payments with a variable rate | Adjustable payments with a variable rate | |
|---|---|---|
| How it works | Your payment stays the same. If the rate goes up, more of each payment goes to interest and less to principal; if it goes down, more goes to principal and you pay off the mortgage faster.[2] | The payment changes when the rate changes. A set amount of each payment goes to principal and the interest portion changes, so you know in advance how much principal you will have paid at the end of the term.[2] |
| What the FCAC flags | If market rates reach a trigger point listed in your contract, the lender may increase your payments so the mortgage is paid off by the end of the amortization period. The FCAC also says that when rates rise, none of a payment could end up going to principal, so the amount owed could increase, and that acting early matters.[2] | If the rate rises, your payments increase.[2] |
The FCAC says to ask a lender about an interest rate cap (a maximum rate you never have to exceed) and a convertibility feature (the ability to convert to a fixed rate during the term). If you convert, the FCAC says you usually pay a fee, certain conditions may apply, and the new fixed rate may be higher than the variable rate you were paying.[2]
An illustration of amortization, not an offer
The FCAC illustrates how amortization changes payments and total interest on a $300,000 mortgage at a 4% interest rate. These are the FCAC’s example figures for explaining the effect, not rates or offers.[1]
| Amortization | Monthly payment | Total cost of interest |
|---|---|---|
| 10 years | $3,033 | $63,919 |
| 15 years | $2,214 | $98,541 |
| 20 years | $1,813 | $135,057 |
| 25 years | $1,578 | $173,418 |
The FCAC cautions that extending the amortization period to lower payments raises the interest costs, which may add up to thousands or tens of thousands of dollars.[1]
How to verify this yourself
Read the two FCAC pages in the reference list; they are the source for each statement above. Your own mortgage contract states the term, the amortization period, the rate type, any trigger point or cap, and the penalty if you break it. Ask your lender or broker to point to those clauses. For how a federally regulated lender must disclose borrowing costs, see the Cost of Borrowing (Banks) Regulations; for how interest is compounded and prepayment is treated, see the Interest Act guide.
What this page does not cover
This page is general information, not financial or legal advice, and it covers Canada only as the FCAC describes it. It gives no current rates, does not compare lenders or brokers, and does not say whether a fixed, variable or hybrid mortgage, or a given term or amortization, is suitable for anyone; that depends on the borrower’s circumstances and the contract. It does not cover the stress test, mortgage loan insurance, prepayment penalty calculations or provincial rules, which our other Canada guides address. The FCAC pages were dated 15 October 2025 and 23 February 2024; this page was last reviewed 3 October 2026.