Choosing the mortgage that will benefit you most can be complicated and overwhelming. Especially with today’s complex mortgage rates, it’s important to understand how to find the best possible rate. First-time homebuyers in Canada have often opted for the most popular option of 5 year fixed mortgages because of their security and consistent payments.
If you need long-term peace of mind, a five-year fixed mortgage is the best combination of security and savings. Before jumping right into a 5-year fixed mortgage, it will benefit you to weigh out the advantages and disadvantages of 5 fixed mortgages rates first. Find out how you can benefit most from a 5 year fixed mortgage rate.
What is a 5-year fixed rate?
A 5-year fixed rate is a mortgage with an interest rate that is locked in for five years. The rate and the monthly payment stay the same throughout the 5 year fixed mortgage rate. At the end of the 5 years fixed mortgage rate you will have to renew or refinance at a new interest rate. The monthly rates and payments will change once you renew or refinance the loan to free up more capital.
It is possible to sell your home before the end of a 5-year fixed mortgage but you may have to pay an early exit fee depending on how much time remains in the term. Longer-term mortgages such as those with five-year terms are often the best value and come with competitive rates.
Why Choose A 5 Year Fixed Mortgage Rate?
5-year fixed mortgage rates are great if you want to lock in their interest cost for many years, prefer stable mortgage payments and/or have no plans to pay off or refinance before five years. It is easy to see the benefit of a fixed mortgage when you consider how rates can fluctuate. When you sign the documents, you have peace of mind knowing that your interest rate will stay the same.
Currently, mortgage rates are at an all-time low and it is unlikely that they will decrease any further. Homebuyers who choose shorter terms won’t save anywhere near as much money in interest as those who go with the longer-term 5-year mortgages. While other terms exist, 5-year mortgages offer home buyers a significantly better rate for an extended period.
Do I Need To Shop Around For A 5 Year Fixed Mortgage Rate?
Not all lenders will offer you the same interest rate. Some may even offer you a lower one than another lender. When you get a five-year fixed mortgage, you want to make sure that you’re getting the lowest interest rates possible. Even 0.5% less in interest can save hundreds if not thousands throughout your loan. So it’s important to compare many different lenders before settling on one and locking down an interest rate with them.
Are 5-Year Fixed Mortgage Rates The Better Option?
There isn’t one perfect term length. Decide based on your financial needs, as well as what interest rates are available. A 5-year term falls in the middle of the spectrum and is a good option for those looking for more stability but still want to maintain flexibility over the mortgage-paying process. 5-year terms provide a good balance – they’re long enough for stability and short enough to give flexibility in the future if needed.
Advantages Of A 5 Year Fixed Mortgage Rate
5 year fixed mortgage rates have a few advantages that homeowners can benefit from. Five-year terms are especially beneficial for homeowners because they allow increased stability and security in their mortgages–the rates remain the same throughout the full 5-year term.
This gives homeowners consistency with monthly payments, allowing them to establish more financial structure which helps build savings over time. 5 year fixed mortgage rates are extremely popular, so this creates a competitive market that allows for lower interest rates to be offered than on other terms.
Disadvantages Of A 5 Year Fixed Mortgage Rate
The 5-year term is sometimes seen as an advantage by some, but can quickly become a disadvantage for those who need to get out of the mortgage early due to life changes like; divorce, job loss or even job relocation. If you need to break your 5-year fixed mortgage agreement, you might have to pay expensive penalties. 5-year fixed rates typically have higher interest rates compared to variable and/or shorter-term fixed rates, except in times of economic downturns.
The Bottom Line
When considering the best 5-year fixed mortgage for you, consider how it contributes to your larger financial goals. A 5 year fixed mortgage may save you money if you plan to stay in the house for the next five years, but if you plan to sell or relocate before then, you will have to break the agreement and endure high penalties.
When comparing variable and fixed-rate mortgages, it is most beneficial to go with a 5-year fixed mortgage when the difference in interest rates between them is less than 1-5%. This type of fixed-rate will typically still be quite competitive. To receive the best possible rates for a 5 year fixed mortgage, it’s important to compare different lenders until you find the lowest available rate for you.
Get A Quote. We Have Competitive Rates!
With so many different types of loans available, it can be difficult to decide which option is best for you. Our experienced team will find the right loan for your situation. Regardless of how good or bad your credit history may be, we’ll match you with a lender who understands your needs and financial goals. We have a variety of loans available for all financial situations and we will make sure you keep more of your monthly income. With our competitive rates, you can maximize your savings. Apply now!