A borrower might have a 30-year mortgage with a 5-year term.
This means that the borrower has 30 years to pay off the mortgage in full, but the interest rate and other terms of the mortgage are fixed for the first 5 years.
At the end of the 5-year term, the borrower can either renew the mortgage with the same lender or refinance with a new lender.
The new term and interest rate will be based on current market conditions and the borrower’s financial situation at that time.
Conclusions and Further Thoughts
Typically, in Canada, mortgage terms are between 3 and 7 years with the 5-year term being the most popular. Over the past 12 months, mortgage rates have been rising back to historical Canadian amounts; 5-6%.
However, many borrowers are opting now for shorter terms than the popular 5-year term. This is because Canadians became very used to very low rates during the time period of 2008-2022 when rates were in a 2-3% range.
Taking shorter terms means that Canadians are betting that mortgage interest rates will be lower at that time than they are now.
I hope they are right…
PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE