The Canadian Mortgage Guide: Rates, Terms, Renewal, and Prepayment
This is the hub for the real-estate mortgage cluster. The renewal rules are the 2026 renewal guide. Fixed versus variable is a decision framework, not a forecast. The qualifying-rate arithmetic is the stress test explainer. Breaking a term is the IRD penalty guide. First purchases, the Home Buyers' Plan, and readvanceable plans each have their own page, linked below. The leveraged version of a readvanceable plan is the existing Smith Manoeuvre guide.
- As of September 2, 2026, the Bank of Canada overnight target is 2.25%. On September 23, 2026, the chartered-bank prime series was 4.45% and the posted 5-year conventional mortgage rate was 6.09%.
- The rate in a commitment is a discount off a posted rate. This page does not quote that discounted rate. It changes by lender and by the day.
- OSFI's minimum qualifying rate for uninsured mortgages is the greater of the contract rate plus 2% or a 5.25% floor. CMHC uses the same qualifying rate for insured debt-service ratios.
- Term is how long the rate contract lasts. Amortization is how long the math takes to reach zero if you never change the payment. They are different clocks.
- Interest on the mortgage that bought the home you live in is not deductible. Paying it down is a guaranteed after-tax return equal to the contract rate. That comparison is the prepayment versus investing guide.
What do the official rates actually say in September 2026?
Three official series set the backdrop. None of them is the rate your lender will type into a commitment.
| Series | Reading | What it is |
|---|---|---|
| Bank of Canada overnight target | 2.25% on September 2, 2026. Bank Rate 2.50%. Deposit rate 2.20%. | The policy rate. The next announcement is October 28, 2026. The Bank said it is prepared to adjust policy as inflation and growth data arrive. |
| Chartered-bank prime | 4.45% on September 23, 2026 | The Bank of Canada's prime series. Each institution sets its own prime from its funding cost. A variable mortgage is usually that lender's prime plus or minus a spread written in the contract. |
| Posted 5-year conventional mortgage | 6.09% on September 23, 2026 | The chartered-bank administered 5-year conventional rate. It is the sticker price that penalty math often starts from. Borrowers typically receive a discount. The size of that discount is lender-specific. |
Table as of September 2026. Sources: Bank of Canada policy announcement of September 2, 2026, and the Bank's Valet series V80691311 (prime) and V80691335 (5-year conventional) for September 23, 2026.
How do term, amortization, and insurance fit together?
| Decision | What it controls | Where to go deeper |
|---|---|---|
| Fixed or variable | Whether the rate is locked for the term, or moves with the lender's prime. | Fixed versus variable |
| Term length | When you next renegotiate, and how large a penalty can be if you leave early. | IRD versus three months' interest |
| Amortization | The payment size. A longer amortization lowers the payment and raises total interest. Insured mortgages are 25 years unless you qualify for CMHC Home Start's 30-year option. | First-time buyer guide |
| Insured or uninsured | A loan-to-value above 80% on a purchase generally needs default insurance. The price cap for insured homeowner loans is under $1.5 million. | Stress test |
| Renew, switch, or refinance | A straight switch can avoid OSFI's prescribed qualifying rate. Adding money or years, or moving a readvanceable plan, is a different application. | Renewal in 2026 |
| Readvanceable plan | A revolving limit that can grow as principal falls, inside OSFI's 65% loan-to-value cap. | Readvanceable mortgages |
What does one percentage point do to the payment?
Canadian fixed residential mortgages compound semi-annually. The monthly rate in the examples below is (1 + annual rate / 2) raised to the power of 1/6, minus 1. The payment is that monthly rate applied to a standard amortizing loan. The 4.50% contract rate is an assumption so the arithmetic is visible. It is an illustration, not a rate on offer in September 2026.
At an assumed 4.50% contract rate, the payment is $2,767 a month. At 5.50%, one point higher, it is $3,052, about $285 more. The stress-test rate on a 4.50% contract is 6.50%, because 4.50% plus 2 points beats the 5.25% floor. The qualifying payment is $3,349, about $582 above the contract payment. You do not pay the qualifying payment. The lender uses it to decide whether the file fits. The full qualifying-rate rules, including CMHC's 39% gross debt-service and 44% total debt-service maxima, are the stress test page.
Where does the mortgage stop and the tax plan start?
A closed mortgage lets you prepay a stated amount each year without a penalty. Using that privilege, versus investing the same dollars, is the prepayment versus TFSA and RRSP comparison. Closing costs, including land transfer tax, are cash on top of the down payment: the closing cost guide. If the property will be a rental, the interest may be deductible and the principal residence exemption may not: start with primary residence versus rental. Life insurance sold at the signing table is a different product from a personal term policy sized to the household; the needs test is the life insurance need analysis. The side-by-side is mortgage life insurance versus term life.
Where does each spoke go deeper?
- Mortgage renewal in 2026 — straight switches, the $3,000 cost allowance, and what still gets stress-tested.
- Fixed versus variable — payment certainty against the penalty you pay if you break the term.
- Minimum qualifying rate — buffer, floor, and who is exempt at renewal.
- Prepayment penalties — FCAC's worked example, then the discount that makes IRD larger.
- First-time home buyer guide — FHSA, HBP, the home buyers' amount, and CMHC.
- Home Buyers' Plan — the $60,000 limit and the 2031 repayment start for a 2026 withdrawal.
- Readvanceable mortgages — the 65% cap and the lender pages that describe the product.
Frequently asked questions
What mortgage rate should I use for planning in September 2026?
Use the rate in a written commitment, not a headline. The official backdrop, as of September 2026, is a 2.25% overnight target, a 4.45% chartered-bank prime series, and a 6.09% posted 5-year conventional rate. The contract rate is a discount from a posted rate. Ask two lenders for the rate, the term, the prepayment privilege, and the penalty formula before you compare a single number.
Is the stress test the rate I pay?
No. You pay the contract rate. OSFI's minimum qualifying rate is the greater of the contract rate plus 2 percentage points or 5.25%. Lenders run debt-service ratios at that higher rate. On an illustrative 4.50% contract, qualification uses 6.50%. The payment you actually make is the contract payment, until the rate resets.
What is the difference between the term and the amortization?
The term is the length of the rate contract, often one to five years. The amortization is the number of years the payment is calculated to pay the balance to zero, often 25, or 30 if an insured first-time buyer or new-build buyer uses CMHC Home Start. At the end of the term you still owe the remaining balance, and you renew, switch, or repay it.
Can I deduct mortgage interest on my home?
Interest on money borrowed to buy the home you live in is not deductible. Interest on money borrowed to earn income from a business or property can be, if the current use of the funds passes the test in paragraph 20(1)(c) and Folio S3-F6-C1. A readvance used for a kitchen, a car, or a TFSA fails that test. The tracing rules are the HELOC guide, and the loop that tries to convert the mortgage is the Smith Manoeuvre guide.
Do I need default insurance if I have 20% down?
A purchase with a loan-to-value of 80% or less is generally uninsured, and you are not required to buy high-ratio default insurance. Some lenders still use portfolio insurance behind the scenes. That is their arrangement, and it can change how a later switch works. High-ratio loans, above 80% loan-to-value, need insurance, and the insured price cap is under $1.5 million.
When should I start a renewal?
Start while you still have time to get a written offer from your current lender and from at least one other federally regulated lender. Read whether the mortgage is insured, whether it sits inside a collateral or readvanceable plan, and whether you need to borrow more. Those three facts decide whether OSFI's straight-switch treatment can apply. The checklist is the renewal guide.
Sources
- Bank of Canada, September 2, 2026 rate announcement
- Bank of Canada Valet: prime (V80691311) and 5-year conventional mortgage (V80691335)
- OSFI: minimum qualifying rate for uninsured mortgages
- CMHC Purchase
- FCAC: prepayment penalties
The rate lasts one term. The tax character of the debt can last the whole amortization.
Interest on a home you live in is not deductible. Interest on money borrowed to invest can be. The filing side of that distinction is the 2026 tax guide.
Get the 2026 Tax Guide — $49 CAD
