40-Year Amortizations: What They Are, Who They're For, and Why They're Making a Comeback

What if there was a mortgage that could shrink your monthly payments - without needing to sell your house or beg the bank for mercy?

Enter: the 40-year amortization.

This ultra-extended mortgage option is showing up more often in 2025, mostly from alternative lenders who understand that sometimes life doesn’t fit into a traditional box.

Let’s break it all down - who offers these loans, why they exist, and when they actually make sense (hint: it’s not always).

What’s a 40-Year Amortization, Anyway?

Amortization is just a fancy word for how long your mortgage is scheduled to take to pay off. The longer the amortization, the lower your monthly payments but the more you’ll pay in interest over time.

Most Canadians are used to 25- or 30-year amortizations.

But 40 years? That’s a new twist on an old tool.

A 40-year amortization spreads your payments out over four decades. That can significantly reduce your monthly payment - but also means you build equity more slowly and pay more interest overall.

These aren’t your standard mortgages. They’re typically offered by alternative lenders like:

• CMLS Aveo (Flex 40)

• Equitable Bank (in partnership with another lender)

And they’re not available everywhere - mostly Ontario, Alberta, and BC. The plan is to expand to other provinces, but that’s it for now.

Who Are These Mortgages For?

Let’s be clear: this isn’t for everyone.

40-year amortizations are designed for people who are stuck between a rock and a hard place:

• Self-employed borrowers who can’t qualify using traditional income docs, but with coaching will be able to file taxes in a beneficial way to get into a more long-term mortgage solution at maturity

  • Remember - Accountants are there to help you pay the least amount at tax time - but you could end up paying more in interest if you filed your taxes using a strategy by getting your accountant and mortgage broker on the same page

• People with high debt loads or tight cash flow

• Households affected by rising rates, daycare costs, or life curveballs

• Buyers who need to bridge the gap before refinancing into something better

  • Honestly, I wouldn’t recommend buying with a 40 year mortgage term off the bat - but sometimes life makes it impossible to avoid. It’s worth chatting about.

This is about staying in your home - or getting one - when traditional lenders say no.

But Wait - There’s a Catch

Actually, there are a few:

• Higher interest rates. These aren’t prime rates. You’re paying more for the flexibility. By quite a bit.

• Short terms. Usually 1- or 2-year fixed terms. These are meant to be temporary solutions.

• Application fees. Lenders charge fees to set up these loans.

• Exit expected. Lenders like Aveo aren’t trying to keep you forever - they want you to “graduate” out to a traditional mortgage later.

This isn’t a long-term savings strategy. It’s a pressure release valve.

A Brief History of 40-Year Mortgages in Canada

Believe it or not, 40-year amortizations were once common.

In 2006, CMHC announced it would insure mortgages up to 40 years, expanding the field from 25 and 30 years (ratespy.com).

That changed quickly:

• In July 2008, the Department of Finance rolled this back, capping amortizations at 35 years

• Then in 2012, they reduced the maximum to 30 years

Why?

Lenders and regulators felt that long amortizations pushed people beyond their means - especially if interest rates climbed. They wanted to curb how long Canadians could stretch their debt so that refinancing wouldn’t lead to financial fragility.

The timing is also not a coincidence - remember the market crash of 2008 in the USA? Canada’s scaling back is also partly reactionary to that as well.

So Why Bring Them Back?

Because people are struggling. And not everyone can qualify for traditional mortgages.

These extended-amortization options offer a non-private lending alternative with:

• Flexible income options: bank statements, contributory income, even liquid assets

• Contract rate qualification: no stress test using inflated rates

• No Loan-to-Income test: you’re not getting boxed out for making “too little” relative to home price

• Higher debt service limits: 55% GDS/TDS

In other words: these products solve affordability challenges without diving straight into expensive private lending.

Final Thoughts

If you’re drowning and just trying to keep up with life, 40-year amortizations might be an option worth exploring.

But they’re not magic.

You’ll pay more over time. You’ll likely need to refinance in a year or two (and actually, you should plan for it). And you’ll need to work with a broker who knows how to position your application for approval.

Still, if the choice is between losing your home or stretching your timeline?

Stretching might be the smartest move.

Book a free call and I’ll help you compare your mortgage options

Or send me your current mortgage details and I’ll run the numbers for you, zero pressure, just clarity