25-Year vs 30-Year Amortization: Which Is Best?

Understanding the difference between a 25-year and 30-year amortization is crucial for both investors and homeowners. Which amortization schedule you should use really depends on your individual goals. Let’s explore which one is best for your situation.

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30-Year Amortization: Maximize cash flow

If you’re an investor focused on building your cash flow, you’ll be better off with a 30-year amortization. The key benefit is a lower monthly payment, which translates directly into better cash flow for your investment properties. This strategy allows you to keep more money in your pocket each month, providing flexibility for additional investments or covering unexpected expenses.

25-Year Amortization: Build Equity Faster

However, if you’re concerned with getting the best interest rate and building equity more quickly, the 25-year amortization is typically your best option. Lenders often offer better interest rates for shorter amortization periods, and you’ll pay significantly less interest over the life of the mortgage.

25-year amortizations are common amongst homeowners who plan to stay in their homes for an extended period and want to build equity faster. This approach means higher monthly payments, but you’ll own your property outright sooner.

Which Amortization Schedule Is Right for You?

The right choice really depends on your personal goals:

Choose 30-year amortization if you prioritize monthly cash flow and want lower payments
Choose 25-year amortization if you want to build equity faster and secure better interest rates
Consider your long-term strategy – are you focused on portfolio growth or paying down debt?

Talk to a Mortgage Professional

If you’re not entirely sure which amortization schedule you should choose and what your amortization means for your mortgage, we suggest reaching out to a mortgage broker for personalized guidance.

We want to help you by offering a free strategy call to discuss your investments and personal mortgages. Whether you’re looking to get a mortgage for a new property or change the amortization schedule on an existing mortgage, we can help you make the most informed decision for your financial goals.

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Frequently Asked Questions

What is mortgage amortization?

Amortization is the total length of time it takes to pay off your entire mortgage if you make regular payments. It determines how your payments are split between principal and interest over the life of the loan. A longer amortization means lower monthly payments but more interest paid overall, while a shorter amortization means higher payments but less total interest.

How much more interest will I pay with a 30-year amortization?

You'll typically pay significantly more interest with a 30-year amortization compared to 25 years. The exact amount depends on your loan amount and interest rate, but it can amount to tens of thousands of dollars over the life of the mortgage. However, many investors view this as an acceptable trade-off for improved monthly cash flow on rental properties.

Can I switch from a 30-year to a 25-year amortization later?

Yes, you can typically change your amortization when you renew your mortgage or through a refinance. This gives you flexibility to start with a longer amortization for cash flow and shorten it later as your financial situation improves. Keep in mind that refinancing may involve costs and potentially different interest rates.

Do all lenders offer 30-year amortization options?

Not all lenders offer 30-year amortization in Canada. It's more commonly available for investment properties and through certain lenders. For insured mortgages (less than 20% down payment), the maximum amortization is typically 25 years. Working with a mortgage broker gives you access to lenders who offer extended amortization options.

How does amortization affect my mortgage approval?

Longer amortization periods result in lower monthly payments, which can help you qualify for a larger mortgage amount. Lenders use debt service ratios to determine how much you can borrow, and lower payments improve these ratios. This is why many investors choose 30-year amortization—it can increase their borrowing capacity.

What's the difference between amortization and mortgage term?

Amortization is the total time to pay off your mortgage (25 or 30 years), while the term is the length of your current mortgage contract (typically 1-5 years in Canada). At the end of each term, you renew your mortgage—potentially with a different lender or rate—while your amortization continues counting down toward full repayment.

Should I choose longer amortization and make extra payments instead?

This can be a smart strategy. Choosing a 30-year amortization gives you lower required payments and flexibility, while making extra payments when possible accelerates your payoff. This approach provides a safety net during tight months while still allowing you to build equity faster when cash flow permits. Check your mortgage prepayment privileges first.

Does amortization length affect interest rates?

Yes, lenders often charge slightly higher interest rates for 30-year amortization compared to 25-year amortization. The rate difference varies by lender but is typically modest. When calculating the total cost of each option, factor in both the rate difference and the additional years of interest payments.

Which amortization is better for rental property investors?

Most rental property investors prefer 30-year amortization because cash flow is typically their priority. Lower monthly payments mean better cash flow from rental income, which can be reinvested into additional properties. The extra interest paid is often offset by the ability to acquire more properties and benefit from appreciation across a larger portfolio.

Can I get a 30-year amortization on my primary residence?

If you're making a down payment of 20% or more (uninsured mortgage), some lenders offer 30-year amortization for primary residences. However, if your down payment is less than 20%, mortgage insurance is required and the maximum amortization is typically 25 years. A mortgage broker can help you find lenders offering extended amortization for your situation.

Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.

Written by

LendCity

Published

January 8, 2026