15-year mortgage amortization period

A 15-year mortgage isn’t the most popular amortization period because the monthly payments are much higher than that of, say, a 25-year period. But if you can make the payments, you stand to save thousands of dollars in interest over the life of your mortgage.

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What are the benefits of a 15-year mortgage?

A 15-year mortgage has helpful benefits including:

• Less interest. You’ll pay much less interest over the life of your mortgage than you would with a longer amortization period.
• Shorter payoff period. Pay off your home almost twice as fast as you would with a 25-year mortgage.
• Build equity faster. Pay down the principal balance and increase your equity at a faster pace.
• Stable payments. Opt for a fixed-rate mortgage and your monthly payment won’t fluctuate, even if the market does.

What should I watch out for?

Although you’ll save money and own your home faster, taking out a 15-year mortgage does have pitfalls:

• Higher monthly payments. You’ll typically pay hundreds more per month than you would on a mortgage amortized over a longer period.
• Modest or limited housing options. Since the payments are higher, you may qualify for a less expensive property than if you’d stretched the mortgage out over 20-, 25-, 30- or 35- years.
• Stricter eligibility requirements. You’ll need to prove you have a strong credit history and sufficient income to make your higher monthly payments.
• Tight cashflow. Having a shorter amortization period doesn’t leave much room for any cashflow shortages during financially tough times. Should you lose your job or have financial difficulties, a higher monthly payment might see you defaulting on your mortgage.

Is a 15-year mortgage right for me?

With a 15-year mortgage, you need to be disciplined with your budget. If you can afford the monthly payments while still saving for the future, a 15-year mortgage may be the right fit for you.

This term could also be attractive to borrowers who want to be debt free by the time they retire. It could be beneficial for those who want to tap into the equity in their home to cover large expenses such as renovations.

On the other hand, if your income is unstable or you’re interested in investing more of your money, you may want to opt for a longer amortization period.

Which lenders offer a 15-year mortgage?

A handful of banks, online providers and credit unions offer 15-year mortgages. Since 25-years is the most popular amortization period in Canada, many homeowners start out with this amortization period and refinance to a shorter term, such as 15- or 20- years, once they know they can handle their repayments.

Bottom line

A 15-year mortgage is ideal for those who want to slash their interest payments and pay off their mortgage much faster. While borrowers benefit from paying less interest over the life of their mortgage, the trade-off is significantly higher monthly payments.

Not sure whether a 15-year amortization period is feasible? Compare the most common mortgage amortization period of 25-years in our guide here.

Frequently asked questions

• Can I pay off a 15-year mortgage sooner?

  Yes, you’re free to pay off your 15-year mortgage ahead of time. Be aware, however, that some lenders charge a prepayment penalty, while other lenders will set a yearly cap on how much you can payoff each year. Ask your lender if this applies to your mortgage or check your mortgage contract.

• Can I refinance a 15-year mortgage?

  Yes, once you term matures. If interest rates have dropped since you were approved for your mortgage or your rate isn’t as low as you’d like, you can refinance to get a better rate. You could also potentially refinance your mortgage to a longer – or shorter – amortization period. When you refinance, you’re applying for a new mortgage, so know that you may need to pay fees and closing costs.

• How much of a down payment do I need?

  You’ll need to put down at least 5%. Putting down less than 20% means you’ll need mortgage insurance, also known as CMHC insurance. Here are the current rules for down payments in Canada:

  • If the purchase price of a property is less than $500,000, the minimum down payment is 5%.
  • If the purchase price is between $500,000 – $999,999, the minimum down payment is 5% on the first $500,000 and 10% on any amount over $500,000.
  • If the purchase price is $1,000,000 or more, the minimum down payment is 20%.

• What's the difference between a mortgage term and the amortization period?

  The amortization period is the total length of your mortgage, while a term is the length of time you lock in your rate and terms for. Once your term ends, which is typically anywhere from 6 months to 10 years, you’ll need to refinance your mortgage.

• Can I get higher than a 15-year mortgage?

  Yes, although 25-year amortization periods are the most common in Canada, you can get a 30- or 35- year mortgage – however you’ll need to pay at least a 20% down payment, as insured mortgages cannot exceed 25-year amortization periods.