Two clocks are running
The mortgage term is the period for which the contract’s conditions apply. Amortisation describes the time scheduled to repay the debt. Those clocks usually have different end dates. A five-year term with twenty years of amortisation does not promise today’s interest rate for twenty years; another balance and another renewal decision may remain when the five years finish. FCAC explains this distinction and the effect of a longer amortisation on payments and interest. [1]
That distinction determines the right comparison window. If two offers both have five-year fixed terms, compare payments, interest, fees and remaining principal over those five years. A lifetime-interest total that assumes the same rate through several future renewals describes a hypothetical path, not a known cost.
Renewal timing matters too. For a mortgage with a federally regulated financial institution, FCAC says the lender must provide a renewal statement at least 21 days before the existing term ends; the same notice period applies if it will not renew. This is a specific regulatory scope, not a universal statement about every Canadian lender. [2]
Number one: the balance actually being renewed
Begin with the principal expected on the renewal date, rather than the original purchase loan. Place the existing balance beside the proposed new balance. If they differ, ask for the bridge between them: scheduled payments before renewal, a planned lump sum, additional borrowing or any costs added to the loan.
Two offers with the same monthly payment are not comparable if one finances more principal. Equally, a smaller balance created by using savings is not a rate discount from the lender. That cash has come from another part of the household’s finances and belongs in the comparison.
For the illustration below, both options start with CAD 300,000. Neither adds fees to principal. Both use a fictional 5.00% nominal annual fixed rate for five years, with monthly payments and semi-annual compounding. The only change is remaining amortisation: twenty years in one case, twenty-five in the other.
Number two: the years left, and the balance at term end
| Measure | 20-year amortisation | 25-year amortisation |
|---|---|---|
| Starting principal | $300,000 | $300,000 |
| Monthly principal and interest | $1,971.38 | $1,744.81 |
| Payments over 60 months | $118,282.51 | $104,688.90 |
| Principal repaid | $49,864.80 | $34,477.48 |
| Interest over 60 months | $68,417.71 | $70,211.42 |
| Principal after 60 payments | $250,135.20 | $265,522.52 |
The longer schedule reduces the monthly payment by approximately $226.56, using unrounded values. Over five years it requires about $13,593.61 less cash for scheduled payments. But it leaves about $15,387.32 more principal outstanding and incurs $1,793.71 more interest during those five years.
Those are three different measures. Cash retained today, interest charged and principal postponed cannot be treated as interchangeable savings. The difference in payments is real cash-flow relief in the model. It is not a reduction in the amount of debt that ultimately needs to be settled.
Our calculation uses an effective monthly rate of (1 + 0.05 ÷ 2) to the power of one sixth, minus one. This translates the assumed semi-annual convention into twelve monthly payment periods. RBC’s fixed-rate calculator disclosures use semi-annual compounding; this supports the chosen convention, not a claim that every Canadian mortgage uses identical terms. [3]
The table calculates without intermediate rounding and rounds outputs to cents. Real schedules can differ because of payment rounding, initial interest adjustments and actual contract provisions. Obtain the lender’s schedule for an exact offer. Nothing here projects a 5% rate beyond the five-year term.
Number three: the cost of changing the arrangement
FCAC’s renewal guidance identifies costs to consider when moving lenders, including discharge, registration, transfer or assignment charges, appraisal and administration costs. Ask which party pays each amount and whether conditions attach to any reimbursement. A new lender must also approve the mortgage. [2]
Do not insert a generic switching allowance and call the result exact. Build a dated list from the actual offers. Separate cash paid now from amounts rolled into principal, because financing a charge can create interest on that charge.
For a small fictional check, suppose two otherwise identical offers differ by $20 a month and moving costs $900 upfront. Simple cash payback is 45 months: $900 divided by $20. Over a five-year term, the gross payment difference would be $1,200, leaving $300 after that assumed cost. This rough test excludes the timing value of money and any difference in remaining principal. It is a screening calculation, not a full assessment of which contract is better.
If one offer also changes amortisation, that shortcut breaks down. Compare the end balances and term interest as well as payment totals. If the move happens before the current term expires, request the actual early-exit cost rather than assuming a maturity-date transfer and an early break have the same price.
Make the payment frequency comparable
A payment quoted every two weeks should not be compared directly with a monthly amount. FCAC distinguishes ordinary biweekly from accelerated biweekly schedules; accelerated arrangements increase the annual amount paid relative to the corresponding monthly schedule. [4]
As an arithmetic example, $900 every two weeks means 26 payments and $23,400 over a normal annual schedule. It is not $1,800 times twelve, which would be $21,600. Count payments before concluding that a quote is cheaper. Then compare how each schedule changes interest and principal, using the actual lender calculations.
Payment flexibility also deserves its own line. Ask what extra payments are allowed, whether an unused privilege carries forward, and what happens if the home is sold during the term. A useful contract comparison can contain important differences that do not fit into a single monthly figure.
The renewal worksheet to take to a lender
- Principal on the renewal date, with any proposed additions or lump sums identified.
- Rate type, quoted rate, compounding convention and offer expiry.
- Term length, remaining amortisation and payment frequency.
- Total payments, interest and projected balance over the same term.
- Transfer, discharge and other fees, including who pays and when.
- Prepayment conditions and a written explanation of relevant exit costs.
If the proposed payment is difficult to sustain, explaining that early gives the lender a concrete problem to address. The numerical comparison above does not choose between immediate cash-flow needs and faster repayment. It makes the trade-off visible, so a lower payment can be understood together with the balance that follows it.
Read the underlying guidance.
- Mortgage terms and amortizationFinancial Consumer Agency of Canada · checked 2026-09-28. Term versus amortisation and payment/interest trade-off.
- Renewing your mortgageFinancial Consumer Agency of Canada · checked 2026-09-28. Federally regulated lender renewal notice and lender-switching cost categories.
- Mortgage Payment Calculator — calculation disclosuresRoyal Bank of Canada · checked 2026-09-28. Semi-annual compounding assumption for fixed-rate calculator; no current product recommendation.
- Choosing a mortgage that is right for youFinancial Consumer Agency of Canada · checked 2026-09-28. Payment frequency distinction, including accelerated biweekly.
Source and arithmetic checks by the producing AI, followed by a separate AI editorial review. Human English editing and subject-specialist review have not been completed. Human Canadian mortgage-specialist and English-editor review; actual renewal documents and fees not obtained.
