Key takeaways
- Your term is usually 1 to 5 years; your amortization is the 25 or 30 years it takes to pay off the mortgage.
- Lenders qualify you at the higher of your contract rate plus 2%, or 5.25%.
- Down payments under 20% need default insurance, which protects the lender, not you.
- Pre-approval is a useful estimate, not a final mortgage commitment.
Types of Mortgages
A mortgage has two time periods. The term is how long your rate and conditions last, commonly one to five years. The amortization is the total time to pay off the loan, usually 25 or 30 years. When the term ends, you renew at the rates available then.
With a fixed rate, your rate stays the same for the term, so your payments are predictable.
With a variable rate, your rate moves with your lender’s prime rate, which usually follows the Bank of Canada. Depending on the product, either your payment changes or more of it goes to interest. Rates can rise, as they did in October 2026, so make sure your budget has room.
An open mortgage lets you pay off the loan at any time without a penalty, but usually at a higher rate. Most first-time buyers choose a closed mortgage, which limits extra payments and charges a penalty if you break it early.
If you put down less than 20%, you’ll need mortgage default insurance from CMHC or a private insurer. The premium, currently 4.00% of the loan at 5% to under 10% down for traditional down payments, is usually added to your mortgage. It protects the lender, not you. Eligible first-time buyers can choose a 30-year amortization on an insured mortgage, which lowers the payment but raises the total interest.
Visual guide · First home
Default insurance premiums
| Down payment | Premium on loan |
|---|---|
| 5% to under 10% | 4.00% |
| 10% to under 15% | 3.10% |
| 15% to under 20% | 2.80% |
| 20% or more | Not required* |
Mortgage default insurance
What it isInsurance required when you put down less than 20%.
Why it mattersIt protects the lender, and the premium is usually added to your loan.
What to doInclude it when you compare payments.
Prepayment penalty
What it isA charge for paying off or breaking a closed mortgage early.
Why it mattersIt can be large if you sell or refinance mid-term.
What to doAsk how it’s calculated before you sign.
How to Get Pre-Approved
A pre-approval tells you how much a lender may let you borrow, and it often holds a rate for a limited time, typically 60 to 120 days.
Gather proof of income, employment details, tax returns and a list of your debts and assets. Then compare offers from banks, credit unions or a mortgage broker.
The lender checks your credit and may ask for more documents, then gives you a letter stating the amount and conditions.
A pre-approval isn’t a guarantee. The lender must still approve you and the specific home, so make sure you’ve dealt with any issues before you remove a financing condition. Tell your lender about any changes in your job or debts, and don’t take on new credit while you’re buying.
How the stress test works
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Get your rateExample: 4.50% from your lender
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Add 2%4.50% + 2% = 6.50%
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Compare to 5.25%Use the higher rate: 6.50%
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QualifyIncome must support payments at 6.50%
Getting pre-approved
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GatherIncome, ID, savings and debt details.
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ApplyUse a lender or mortgage broker.
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ReviewThe lender checks credit and income.
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ReceiveGet a maximum amount and a rate hold.
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ShopStay within a budget you’re comfortable with.
Understanding Interest Rates
Your interest rate is the price of borrowing. It depends on the mortgage type, the lender, your down payment and the economy.
Variable rates are influenced most directly by the Bank of Canada’s policy rate, which was raised to 2.50% on October 28, 2026. Fixed rates tend to follow government bond yields, so they don’t always move at the same time.
Your credit matters too. A higher score can help you get a better rate, so check your report before you apply.
Compare more than the rate. Prepayment options, penalties and whether a rate hold is available can all matter. A small difference adds up over many years, so it’s worth asking more than one lender.
Visual guide · First home
25 or 30 years? $655,000 borrowed
| Amortization | Monthly payment | Interest over full period |
|---|---|---|
| 25 years | $3,770 | $449,877 |
| 30 years | $3,441 | $556,366 |