Published by Beaver Ledger · Edited
A simplified teaching example. A real quote needs Canadian compounding and your contract's terms.
The question
Why does the balance fall slowly at the beginning?
Because early on, your balance is at its largest, so more of each payment goes to interest and less to the loan itself. As the balance shrinks, that split shifts toward paying down the loan. Amortization is this planned paying-down over time.
Example: two payments
Take a simplified loan with $100,000 owing, interest of 0.4% a month and a $600 monthly payment. In the first month, $400 goes to interest and $200 to the loan, leaving $99,800. The next month, interest is $399.20, $200.80 goes to the loan, and you owe $99,599.20.
The 0.4% a month is made up for teaching; it isn't how Canadian mortgage rates are quoted. The example only shows the split, and ignores fees.
A longer amortization: smaller payments, more interest
With the same rate and amount, stretching the loan over more years lowers each payment but raises the total interest, as long as the rate is above zero. A lower payment doesn't make the loan cheaper.
The term ends long before the loan
A five-year term and a 25-year amortization are different things. When the term ends, you'll usually still owe most of the loan, and a new rate can change your payments and total cost. A lifetime interest figure at one rate is a scenario, not a forecast.
Comparing amortizations
Try a shorter and a longer amortization with the same amount and rate, then check whether the higher payment fits your budget. If you plan to pay extra, read your prepayment limits and penalties first.
- Look at the payment and the total interest together.
- Keep the unknown renewal rate separate from today's numbers.
- Use your lender's amortization schedule for the actual balances.
Sources checked for this editorial revision on October 3, 2026. Educational content from Beaver Ledger; no professional review is claimed. Methods and limitations · Editorial practices and corrections.