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Finding the perfect mortgage can feel like embarking on a journey into the unknown. With so many different options, learning the various terms and how they best fit your situation can feel overwhelming — and that’s okay! In this article, I’ll help you discern the differences between short-term and long-term fixed mortgages and outline the advantages and disadvantages of each to help you make an informed decision.
A fixed-rate mortgage is a type of home loan where the interest rate remains the same for an agreed period, called the term. This means that your monthly payments will remain constant.
This option differs from a variable-rate mortgage, which involves interest rates rising or falling depending on market conditions. With fixed rates, you don’t have to worry about these fluctuations.
One of the most significant advantages of fixed-rate mortgages is that they allow you to plan your finances with certainty. Knowing the exact amount you need to pay each month helps you budget accordingly and eliminates the looming fear of unexpected payment increases. This stability can be especially helpful for:
Interest rates for fixed-rate mortgages are influenced by various factors, including:
Generally, fixed-rate mortgages are tied to Government of Canada bond yields — when bond yields rise, mortgage rates also tend to increase, and vice versa. It’s essential to keep in mind that interest rates can vary among lenders, so shopping around can help you get a better picture of the most competitive rates.
Short-term fixed mortgages are loans with brief terms, typically one to three years. During this period, the interest rate will remain fixed, which provides certainty and stability to your monthly mortgage payments. At the end of the term, you’ll get to renew your mortgage agreement, at which time the interest rates may change.
Long-term fixed mortgages provide a fixed interest rate throughout your mortgage term, typically ranging from five to fifteen years or more.
When choosing between short-term and long-term fixed mortgages, it’s essential to consider the following:
One of the best ways to gain clarity about the mortgage landscape is to reach out to me. We can evaluate your current financial situation, goals, and plans and decide which option is best for you. As a mortgage broker, I’ll shop around on your behalf to ensure you’re getting the best rates possible.
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.