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What is an Amortization Schedule?

This post was originally published on March 15, 2020, and was updated on October 11, 2022. 

When you’re looking to buy a home, there are lots of terms you’ll need to get familiar with. One of those terms is amortization. You’re also going to get very familiar with the concept of an amortization schedule.

So what is an amortization schedule? Here’s everything you need to know regarding amortization schedules in Canada.

What is amortization?

Amortization is a broad financial concept, but for mortgages it refers to total life of your loan, over which repayments are made. In Canada, most mortgage amortizations are 25 years. This is partly because insured mortgages have a maximum amortization period of 25 years, set by the federal government. Other mortgages can have amortization periods of up to 35 years.

For mortgages, shorter amortization periods will reduce the amount of interest you pay overall, but will increase your monthly payments. A longer amortization period will do the opposite. To understand this in more detail, you’ll want to look at your amortization schedule.

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What is an amortization schedule?

An amortization schedule is a table of regular payments, layed out over the course of the life of your mortgage, typically 25 years. Your amortization schedule lists every payment, and specifies how much of each payment goes toward paying off the interest vs. the principal loan amount. In the case of a loan with changing interest rates, like a mortgage, the amortization schedule will use the current rate, and be adjusted as rates change.

A mortgage amortization schedule is an excellent tool to help you truly understand the ongoing costs of your mortgage.  If you’re currently looking to buy a home, use our mortgage amortization calculator to calculate an amortization schedule for yourself.

Amortization schedule example

We’ve used the Ratehub.ca mortgage payment calculator to generate a yearly amortization schedule for a typical mortgage (when this post was originally published, we had not yet built our amortization calculator). For this example, we’ve used a Toronto home with a purchase price of $500,000 with a 5-year fixed term at 2.24%. The amortization period is 25 years.

(Source: Ratehub.ca mortgage payment calculator)

Calculating an amortization schedule

As you can see above, there are a lot of numbers to crunch when you’re calculating an amortization schedule. Luckily, our mortgage payment calculator did the hard work for you. You can now use our newly launched amortization calculator to generate an amortization schedule for an even easier experience. Put in some figures, like the purchase price, interest rate and amortization period, and the bottom section of the calculator will generate an amortization schedule for you. 

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The bottom line

An amortization schedule is one of the more weighty elements of any mortgage application, but it’s an important piece of the puzzle. It helps you fully understand your long term repayment obligations, and plan how you’ll pay down your mortgage over time. Use our amortization calculator to calculate your amortization schedule for different amortization periods, and at different interest rates.

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