Why 35-Year Mortgages Are Creating “Forever Loans” — And What to Do About It
On a 35-year amortization at current rates, roughly $3,600 of a $4,000 monthly payment goes to interest — only $400 builds equity. Static variable rate mortgages are worse: your payment stays the same while the interest portion grows, stretching effective amortization to 100+ years. At renewal, always shop rates — you can save 0.5-1% versus your bank’s default offer.
Here’s a number that should make you uncomfortable: if your mortgage payment is $4,000 a month on a 35-year amortization at today’s rates, roughly $3,600 of that is going straight to interest. Four hundred dollars a month toward actually owning your home. That’s it.
I had Jeff Mudrick back on the Supply and Demand podcast — he’s a mortgage specialist I trust, and we’ve done multiple episodes together because the guy doesn’t sugarcoat anything. This conversation was about what he calls “forever loans” — mortgages that are technically amortized over 35 years but functionally stretch to 100+ years because you’re barely paying down principal. And the scariest part? Most people don’t even realize they’re in one.
Here’s what’s actually happening with Canadian mortgages right now.
Why the Bank of Canada’s guidance is unreliable
Jeff had a pretty blunt take on this one, and I think a lot of people in the industry would agree privately even if they won’t say it publicly.
“The Bank of Canada — I hate to say it — they haven’t been consistent with what they say. They say one thing, they do the opposite.”
Watch bond yields instead. Canadian 5-year bond yields directly influence fixed mortgage rates. When bond yields drop, fixed rates follow — often before the Bank of Canada makes any announcement. Bond yields respond to actual market forces (inflation data, economic indicators, global capital flows) rather than political messaging.
The spread matters too. Banks add a spread on top of bond yields to set mortgage rates. During normal times, that spread is relatively thin. During uncertain times, banks widen it to protect themselves — which means your rate can stay high even when bonds are dropping. Jeff watches for the spread to narrow as a sign that real rate relief is coming.
The takeaway: if you’re making a major decision about locking in or staying variable, bond yields are a better compass than Bank of Canada press conferences.
What actually happens at renewal
This is where most Canadians leave money on the table. Your bank sends you a renewal offer, you sign it, done. Jeff says that’s almost always a mistake.
Option 1: Straight renewal (the lazy option). Sign what your bank sends you. This is what most people do. It’s also almost always the most expensive option. Banks count on inertia — they know switching lenders feels like a hassle, so they offer you a rate that’s higher than what they’d give a new customer.
Option 2: Shop rates. Get quotes from two or three other lenders or a mortgage broker. You can often save 0.5% to 1% off your bank’s renewal offer. Even if you end up staying with your current bank, showing them a competing offer usually gets you a better rate. This takes maybe two hours of your time and can save you thousands over the term.
Option 3: Re-extend your amortization. If you originally had a 25-year amortization and you’re 5 years in, you can re-extend back to 25 years at renewal. This lowers your monthly payment. Yes, you’ll pay more interest over the life of the mortgage. But if cash flow is tight — especially with rate increases — this can be the difference between comfortable and stressed. Jeff’s advice: use the breathing room strategically, not permanently.
“You can re-extend your amortization. You don’t have to keep it at 20 years if you’re five years in. You can go back to 25 if you need the cash flow relief. Just don’t do it every single time or you end up in a forever loan.”
Variable vs. fixed: what Jeff actually recommends
This is the question everyone asks, and Jeff’s answer is more nuanced than most mortgage advice you’ll find online.
Fixed rate makes sense if you need predictability. If you’re budgeted tight and a rate increase would cause real stress, lock in. The premium you pay for certainty is insurance — and insurance has value.
Variable rate has historically been cheaper over any rolling 5-year period. But — and this is crucial — only if you can absorb the swings. If you go variable, Jeff recommends the adjustable type (where your payment changes with rates) over static variable. You’ll feel rate increases immediately, but your amortization stays on track. With static variable, you might not feel anything until renewal — when the damage is already done.
The hybrid approach: Some borrowers split their mortgage — part fixed, part variable. It’s a hedge. You get some rate protection and some upside if rates drop. Jeff says this can make sense for people who want exposure to variable rates but can’t stomach the full risk.
The bottom line
The mortgage market has fundamentally changed. Thirty-five-year amortizations, static variable rate products, and algorithmic appraisals have created an environment where it’s easier than ever to end up in a mortgage that feels affordable but barely builds equity.
That doesn’t mean homeownership is a bad idea. It means you need to understand what you’re signing. Know the difference between adjustable and static variable. Know what your principal-to-interest ratio looks like. Know your options at renewal — and for the love of everything, don’t just sign your bank’s renewal letter without shopping around first.
Jeff’s been in the mortgage industry long enough to have seen every version of this cycle. His advice hasn’t changed: understand your product, watch bond yields instead of Bank of Canada headlines, and if you’re feeling squeezed, talk to your lender before it becomes a crisis. Banks don’t want your house. They want to keep collecting interest. Use that to your advantage.
Related Reading
Mortgage Renewals in Canada: Why 47% of Homeowners Are Overpaying Their Bank — Jeff Mudrick’s first episode on renewal strategies and how to negotiate with your lender.
Vision Real Estate Buying Guide — The full buying process for Toronto and York Region, including financing considerations.
Deposit Protection: What Ontario Buyers Need to Know — Understanding the financial protections built into your real estate transaction.
Frequently Asked Questions About Mortgage Amortization and Renewal
What is a forever loan in Canadian mortgages?
A forever loan is a mortgage where the borrower is paying so little toward principal that the amortization effectively stretches to 100+ years. This happens most often with static variable rate mortgages — where the payment stays fixed but the interest portion grows as rates rise. A 35-year amortization at today’s rates can mean paying $3,600 toward interest on a $4,000 monthly payment, with only $400 going to principal. At that rate, you’re essentially renting from the bank.
What is a static variable rate mortgage and why is it dangerous?
A static variable rate mortgage keeps your monthly payment the same even as interest rates change. When rates rise, more of your payment goes to interest and less to principal — without you noticing. In extreme cases, the effective amortization can stretch to over 100 years because you’re barely paying down any principal at all. Most borrowers don’t realize this is happening until renewal, because the payment amount never changed.
Should I trust the Bank of Canada’s forward guidance on interest rates?
According to mortgage specialist Jeff Mudrick, the Bank of Canada’s forward guidance has been unreliable — saying one thing and doing the opposite within months. A better indicator is the bond yield market, specifically Canadian 5-year bond yields, which directly influence fixed mortgage rates. Bond yields respond to real market forces rather than political messaging.
What are my options at mortgage renewal in Canada?
You have three main options: (1) Straight renewal — sign at the rate your bank offers (usually the worst deal). (2) Shop rates — get quotes from other lenders and brokers; you can often save 0.5-1% off the bank’s renewal offer. (3) Re-extend your amortization — if you originally had 25 years and you’re 5 years in, you can re-extend back to 25 years and lower your payment. This costs more interest long-term but provides immediate cash flow relief. You can also convert from variable to fixed or vice versa at renewal.
Can my bank foreclose on my home if I can’t make my mortgage payments?
Banks almost never foreclose in Canada — it’s not in their interest. Foreclosure is expensive, slow, and results in the bank selling your property below market value. In most cases, banks will work with you: extending amortization, adjusting payments, or finding other solutions to keep you paying. Power of sale (Ontario) is more common than foreclosure, but even that is a last resort. The bank wants your mortgage payments, not your house.
Watch the Full Episode
This is from my conversation with Jeff Mudrick on Supply and Demand. Jeff’s a mortgage specialist who’s been through multiple rate cycles and doesn’t hold back when it comes to how the system actually works. If you’re coming up on a renewal or shopping for a mortgage, this one’s worth your time. Listen on Apple Podcasts or Spotify, or watch the full episode below:
If you’re buying in the GTA or coming up on a mortgage renewal and want to talk through your options — or need a recommendation for a mortgage specialist who actually explains the math — reach out. I’m happy to connect you.
Adam Nadler | Vision Real Estate | Buying Services | RE/MAX Your Community Realty