- Mortgage Rates Alberta
- Mortgage Rates New Brunswick
- Mortgage Rates Newfoundland
- Mortgage Rates BC
- Mortgage Rates NWT
- Mortgage Rates Nova Scotia
- Mortgage Rates Ontario
- Mortgage Rates Prince Edward Island
- Mortgage Rates Saskatchewan
Mortgage rates can either be fixed or variable. For a fixed mortgage – it means that the rate is set at a specific percentage for the term, while variable mortgage rate fluctuates as per the market interest rate (also known as the prime rate).
A 5-year mortgage rate depicts the length of a mortgage term - which is the length of time you commit to a specific mortgage rate. This doesn’t indicate that your mortgage will be paid off in 5 years. The time period it takes to pay off the mortgage is called the Amortization Period. Think of the mortgage term as a threshold, after which you would need to renew your mortgage for a new term.
One of the biggest advantages of a fixed rate mortgage is that you will always know how much your mortgage payments will be, whether the rates increase or decrease. A fixed mortgage rate will allow you to plan your budget without worrying about your mortgage payments changing for the length of the term. For example, on a 5-year fixed mortgage in BC whose rate is 2.45% it means that you will pay 2.45% interest throughout the term of the mortgage (5 years in this example).
Although it may seem that longer mortgage term offers more stability, it is recommended to lock in BC's lowest interest rate for 5 years. However, there is always the chance that you might end up paying higher interest when the variable rates are low.
A 5-year fixed mortgage is the cheapest mortgage for anyone who wants to lock in their payments and interest for a suitable term. This term ensures you don’t need to refinance or be charged a higher rate on your mortgage before the five year term is over.
Should you decide to switch to a 5-year fixed mortgage term, most lenders will pay for legal and appraisal fees. However, it is important for you to note that you can’t change or switch a collateral charge mortgage or a credit linked mortgage. When changing lenders these type of mortgages will require to be refinanced.
If you are unsure and may need to break the mortgage before the term ends, you could be subject to high penalty from the lender. This penalty could be significantly high as its calculated using the lenders posted rates – not the actual rate.
Also long term fixed rates accrue more interest as compared to variable and short-term fixed rates. However 5 years is considered to be a popular mortgage term as about half of all mortgages have 5-year fixed terms. At times when the difference between fixed and variable rates is minimal, most people will choose the 5-year fixed rate in BC for better stability.