The 10 year fixed mortgage rate has a constant interest rate for a period of 10 years. The term isn’t same as the amortization period which refers to the total time required to complete the mortgage payment. The 10 year term is simply the period of time that the borrower is committed to the mortgage rate and contractual provisions with their lender. Your mortgage payments will remain fixed for each month and you’ll also be protected from the fluctuations of the interest rate.
The 10 year fixed mortgage rate is the most risk-averse choice, if the borrower needs to budget for long term or simply believe that the interest rates will dramatically rise over the approaching years, then this mortgage term may make some good sense. For instance, if a borrower feels that they are certain that in mortgage rates will be higher in five years than the currently quoted rate, locking in for the long term is a better strategy.
How Popular is 10 Year Fixed Mortgage Rates in Canada
The 10 year fixed mortgage rate is not as such popular since only 7% of the mortgage borrowers have terms ranging between 6 and 10 years. In short, long-term mortgage rates are not popular options in Canada. In fact, their popularity among the younger age groups is even less at about 3% for those between 18 and 34 years of age. Generally, fixed mortgage rates are the most popular in the country, with 66% out of all the mortgages.
However, the 10-year fixed term also has disadvantages:
Early termination of the term attracts higher penalties. The penalties of the major banks can be really extreme since the calculations are done using the posted rates of the bank rather the actual rates.
The 10 year fixed mortgage rates cost borrowers more interest historically as compared to the shorter-term fixed and variable rates.
Just a small number of people keep their home for as long as 10 years. This, in turn, raises the odds that the homeowners will renegotiate prior to maturity and make the penalty payment to abandon the 10-year fixed mortgage term.