Everything Alberta Buyers Need to Know About How Mortgages Work in Canada
Renee Huse, founder of Spire Mortgage Team in Alberta, walks hundreds of first-time buyers through this process every year. From Airdrie to Lethbridge, we help Albertans understand what they’re signing up for—so they can buy smart and feel confident in their decisions.
What We'll Cover
- What a Mortgage Really Is (and Isn’t)
- Minimum Down Payment Rules in Canada (2025 Update)
- What is Default Mortgage Insurance?
- What is Amortization?
- Mortgage Terms vs. Amortization: A Canadian Twist
- Fixed vs. Variable Rates (2021–2025 Volatility)
- Case Study: How Jordan Bought His First Home in Lethbridge
- Glossary: Key Mortgage Terms for Albertans
- FAQs
What a Mortgage Really Is (and Isn’t)
A mortgage is not just “renting from the bank.” It’s a long-term debt instrument that lets you own a home while building equity gradually. The bank lends you most of the purchase price, and you agree to repay it over time—with interest.
Every mortgage payment includes:
- Principal – Reduces your loan balance
- Interest – The cost of borrowing money
It’s also a financial planning tool. With the right mortgage setup, you can:
- Moderate your monthly costs
- Build equity faster when it makes sense
- Refinance to access equity for renovations or investments
- Protect yourself against future rate shocks
Smart mortgages aren’t just about rates—they’re about control, flexibility, and long-term gains.
Minimum Down Payment Rules in Canada (2025 Update)
As of December 2024, Canada has updated its insured mortgage rules to make higher-priced homes more accessible.
Here’s what’s required:
- 5% on the first $500,000
- 10% on the portion between $500,001 and $1,500,000
- 20% on anything over $1.5 million (not insurable)
Example: $700,000 home in Calgary
- 5% of first $500,000 = $25,000
- 10% of remaining $200,000 = $20,000
- Total Minimum Down Payment = $45,000
Example: $1.3 million home in Edmonton
- 5% of first $500,000 = $25,000
- 10% of remaining $800,000 = $80,000
- Total Minimum Down Payment = $105,000
What is Default Mortgage Insurance?
When you buy a home with less than 20% down, your lender is required to insure your mortgage through a national insurer (CMHC, Sagen, or Canada Guaranty). This protects the lender—not you—if you default.
But here’s why it matters: Default insurance allows you to buy with less cash upfront and qualify at better interest rates.
Insurance Premium Rates
| Down Payment | Premium Rate |
|---|---|
| 5% – 9.99% | 4.00% |
| 10% – 14.99% | 3.10% |
| 15% – 19.99% | 2.80% |
| 20% or more | Not required |
Example: $500,000 Purchase in Red Deer
| Down Payment | Loan Amount | Premium Amount | Total Mortgage (incl. Premium) |
|---|---|---|---|
| 5% ($25,000) | $475,000 | $19,000 | $494,000 |
| 10% ($50,000) | $450,000 | $13,950 | $463,950 |
| 15% ($75,000) | $425,000 | $11,900 | $436,900 |
| 20% ($100,000) | $400,000 | $0 | $400,000 |
Spire Tip: These premiums are added to your mortgage amount—you don’t pay them upfront.
What is Amortization?
Amortization is the total time over which your mortgage is repaid—typically 25 or 30 years.
It directly impacts:
- Your monthly payment (longer = lower payments)
- Your interest cost (longer = more interest paid)
Mortgage Terms vs. Amortization: A Canadian Twist
In the U.S., homebuyers often get a 30-year mortgage and lock in their rate for the full 30 years. In Canada, it’s different.
- Your amortization might be 25 or 30 years
- But your term (the contract with your lender) is usually just 1 to 5 years
At the end of each term, you’ll need to renew, renegotiate, or switch lenders. That means you’ll likely have multiple terms throughout your amortization.
2025 Amortization Rules
| Buyer Type | Down Payment | Max Amortization | Property Type |
|---|---|---|---|
| Any Buyer | 20%+ | 30 years | Any |
| First-Time Buyer | <20% | 30 years | New or Resale |
| Repeat Buyer | <20% | 25 years | Resale only |
| Repeat Buyer | <20% | 30 years | New builds only |
Spire Tip: Amortization = Cash Flow Strategy
Use amortization as a lever:
- In high-rate markets? Extend to 30 years to reduce monthly payments.
- In lower-rate markets or when income improves? Shorten your amortization or make lump sum prepayments.
Fixed vs. Variable Rates (2021–2025 Volatility)
Between 2021 and 2025, rates changed dramatically, and the fixed vs. variable decision became harder.
Fixed Rate
- Locked in for your term
- Easy budgeting
- Higher penalties to break
Variable Rate
- Moves with prime rate
- Lower penalties
- Risk of rate increases
Spire Strategy: We assess your full profile to help you decide. Some clients opt for hybrid mortgages—part fixed, part variable—for balance.
Case Study: How Jordan Bought His First Home in Lethbridge
Jordan, a 28-year-old teacher, bought a $420,000 townhouse with $42,000 (10%) down.
- Purchase Price: $420,000
- Down Payment: $42,000 (10%)
- Loan Amount: $378,000
- Default Insurance Premium (3.10%): $11,718
- Total Mortgage (incl. insurance): $389,718
- Rate: 3.99% (5-year fixed)
- Amortization: 25 years
- Monthly Payment: ~$1,990
We structured bi-weekly payments and included a 10% lump sum option to allow for early payoff flexibility.
“It felt overwhelming at first, but the plan gave me clarity. I knew what to expect and how to make it work.”
Glossary: Key Mortgage Terms for Albertans
- Amortization – Total time to pay off your mortgage
- Term – Contract length for your rate
- Principal – Loan balance
- Interest – Cost to borrow
- Down Payment – Your upfront equity
- Default Insurance – Coverage that protects the lender on <20% down
- Fixed Rate – Stable payment
- Variable Rate – Market-based rate
- Prepayment – Extra payments
- Hybrid Mortgage – Mix of fixed + variable
FAQs
This section will include FAQ schema on final export.
- What’s the difference between amortization and term?
Amortization is your full repayment period; term is your current contract. - Can I buy a $1.4M home with less than 20% down?
Yes—5% on the first $500,000 and 10% on the rest up to $1.5M. - Does mortgage insurance protect me?
No—it protects your lender but helps you qualify with less down. - Should I go fixed or variable in 2025?
It depends—we’ll help you decide based on your goals. - Do first-time buyers get 30-year amortization?
Yes—for both new builds and resale homes.
Ready to Buy Smarter?
Give us a call or fill out an application at this link: https://spiremortgage.ca/apply-now and our team will get in touch with you to start building a plan that suits you.
Written by Renee Huse, licensed mortgage broker and founder of Spire Mortgage. Renee helps Albertans make confident real estate decisions with smart financing strategies tailored to their goals. Learn more about Renee here.
