With a 5 year fixed rate mortgage the rate remains the same for a 5 year term with your mortgage. The 5 year fixed mortgage is the most popular option amongst first time buyers.
Mortgage terms generally range from six months to 10 years. A 5 year fixed is a nice middle between the two. Contact me anytime to help find you the best 5 year fixed mortgage rates in Ontario.
5 year fixed rate mortgages give you security for the five years term and protect you against rate fluctuations. If rates go up your rate is secure however if rates go down you will unfortunately not be able to take advantage of these lower rates without paying a penalty to break your mortgage.
Learn more: The most common reasons people break a mortgage
Many like 5 year fixed rate mortgages because they provide peace of mind for five years. The peace comes from knowing exactly what the mortgage rate and mortgage payment is for the term.
Typically the longer you lock in an interest rate, the higher the interest rate. Therefore, a 2 year fixed rate mortgage and 3 year fixed rate mortgage may be at a lower interest rate that a 5 year fixed rate. Just like a five year fixed rate will be at a lower interest rate then a 7 and 10 year fixed rate mortgage.
Learn more: See today’s best 5 year fixed mortgage rate
The number one advantage of a 5 year fixed rate mortgage is knowing exactly what your monthly mortgage payment will be for the next five years.
This can greatly assist with budgeting or managing especially when buying a house for the first time and having many of the costs associated with owning a house be new to you.
A disadvantage however is that you do lose some flexibility. If interest rates were to decrease during the term, you would have to wait till the end of the term in order to take advantage of them. If not, you may face a penalty.
Also, if you are planning to pay your mortgage off in less than five years, there may be penalties associated with paying the mortgage off faster.
Most lenders allow 15 to 20% annual lump sum prepayment privileges.
Learn more: Prepayment
If you are planning on moving during the next five years is important to make sure that your mortgage is portable. Also to make sure your mortgage is portable to the area you were looking to purchase in. For example, not all lenders lenders lend in all provinces if looking to leave the province.
Learn more: Porting a mortgage
Talk to a mortgage broker to review your goals for the next five years to see if this mortgage is the best fit for you.
The best 5 year fixed rate mortgage is the mortgage that has the least amount of money spent on interest over five years.
When comparing these mortgages to find the best deal, always look to the interest rate, set up fees, options and terms. When refinancing or switching your mortgage to a new lender at renewal you need to also factor in any costs associated with an appraisal, discharge fees and more, if applicable.
If adding any of these fees to your mortgage you will then be paying interest on these fees which increases your payment.
Learn more: Mortgage payment calculator
Mortgages can be complicated. I invite you to contact me anytime if you’re interested in learning more about fees, penalties and more that you can encounter with a mortgage.
If you’re not sure which lender offers the best rates, I would be happy to review the pros and cons of different lenders and terms with you.
Applying for a five year fixed rate mortgage is reviewed with the same criteria as any other term. For example, a variable rate or a 2 year fixed rate. Typically the best interest rates are currently for those with an insured mortgage. These mortgages are for those with less than 20% down.
Learn more: Insured mortgages
The next best mortgage rate is for those borrowing up to 65% of the value of the home.
Nearing the end of your five year term, your current lender will reach out to you with a renewal offer. Many lenders do not offer the best rates to their clients at renewal. Therefore, it is important to shop around your mortgage renewal rate as well.
Absolutely, in Canada the longest mortgage term is 10 years. The longer you lock in the higher the interest rate so the 10 year fixed rate mortgage will be higher than a five year fixed.
Currently there are some fantastic rates available on these mortgages. As this mortgage is one of the most popular options, typically it is the first product to see various promotions and discounts offered on it.
If you do not need to have a mortgage for five years or would like more flexibility there are times where you may see a lower interest rate with a 2 or 3 year fixed rate for example.
Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.
Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.