How Canadian Mortgage Amortization Works

How a Canadian amortization schedule breaks down payments into principal and interest, with semi-annual compounding and 5-year term renewals.

Verified against Financial Consumer Agency of Canada - Understanding Your Mortgage on 28 Feb 2026

Updated 28 February 2026 4 min read

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Summary

A Canadian amortization schedule shows how each mortgage payment splits between principal and interest over the full amortization period (typically 25 years). Canada’s unique semi-annual compounding rule means the effective monthly rate differs from a simple annual-rate-divided-by-12 calculation, and the 5-year term structure means the schedule resets at each renewal.

How it works

The amortization formula (Canadian version)

Canadian fixed-rate mortgages compound semi-annually. The monthly payment formula is the same as the standard amortization formula, but with a different monthly rate:

Effective monthly rate = (1 + annual rate / 2)^(1/6) - 1

Each month:

Interest = outstanding balance x effective monthly rate
Principal = monthly payment - interest
New balance = old balance - principal

Amortization vs term

This distinction is critical in Canada:

Concept	Meaning	Typical length
Amortization	Total time to fully repay the loan	25 years (insured), up to 30 years (uninsured)
Term	Period before rate renewal	1-5 years (5 most common)

At each term renewal, the remaining balance is re-amortized at the new rate for the remaining amortization period. This can significantly change the payment amount if rates have moved.

Why early payments are mostly interest

On a C$522,353 loan at 3.69% over 25 years:

Month 1: C$1,594 interest, C$1,071 principal (60% interest)
Month 150 (halfway): roughly equal split
Month 300 (final): C$8 interest, C$2,657 principal

Accelerated payment options

Canadian lenders commonly offer accelerated payment schedules:

Accelerated bi-weekly: 26 payments of half the monthly amount (equivalent to one extra monthly payment per year)
Weekly: 52 payments per year, reducing amortization by 3-4 years on a 25-year mortgage

Worked example

C$400,000 loan, 3.69% fixed, 25-year amortization:

Effective monthly rate: (1 + 0.0369/2)^(1/6) - 1 = 0.3051%
Monthly payment: C$400,000 x [0.003051 x 1.003051^300] / [1.003051^300 - 1] = C$2,041
Month 1: Interest = C$400,000 x 0.003051 = C$1,220. Principal = C$2,041 - C$1,220 = C$821
Month 2: Balance = C$399,179. Interest = C$1,218. Principal = C$823
Year 1 totals: C$9,953 to principal, C$14,539 to interest
Balance after year 5 (first renewal): approximately C$346,500
Total interest over 25 years: (C$2,041 x 300) - C$400,000 = C$212,300

Key differences from other markets

Term renewals reset the schedule. In the UK and US, the amortization schedule runs uninterrupted for the full mortgage term. In Canada, the schedule effectively restarts every 5 years at the new rate, making long-term interest projections uncertain.
Accelerated bi-weekly payments are a standard Canadian lender feature that shaves 3-4 years off a 25-year amortization. This option is less commonly offered in other markets.