Best 7-Year Fixed Mortgage Rates
Most of the Canadian banks offer the 7-year fixed mortgage rate to the borrowers seeking something with more commitment than a usual 5-year term. Banks are however not the only game players, mortgage brokers, credit unions and specialty lenders also offer special rates which are designed purposely to undercut banks. However, they tend to compete with the terms which are at most five years.
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How Popular is 7 Year Fixed Mortgage Rates in Canada
The 7-year fixed mortgage rate has a very poor penetration among borrowers with only 1% or even less choosing it. Most of the lenders will pay the borrowers appraisal and legal fee when the latter switch into the 7-year mortgage. However, one cannot switch a mortgage that’s been linked to a credit line or a collateral charge mortgage. These mortgage types must be refinanced when the borrower is changing the lender.
The 7 year fixed rate term isn’t as popular as the 5 year term since it is only desirable to those who want something higher than 5 year term but not ready to pay the higher 10 year term rates. This population comprises of the minority.
Pros & Cons of a 7yr Fixed Mortgage Rate
The 7 year fixed mortgage rate is chosen by some people due to the following reasons:
- It offers more rate of certainty than what’s offered by a five year fixed mortgage rate.
- It best suits those who do not want to pay the higher rates of the 10 year fixed term but want something more than the typical 5 year fixed rate term.
However, the 7 year fixed mortgage rate has a few disadvantages:
- Early termination can attract higher penalties. The penalties of the major banks can be extreme relatively since their calculation is done using the posted rates of the bank rather than the actual rates.
- The 7 year fixed mortgage has cost borrowers more interest historically compared to the short term fixed and variable rates.
- Most of the people below 50 years of age do not keep their homes for at least 7 years, hence raising odds they will renegotiate prior to maturity. This in turn increases the chances that they will pay penalties with the 7 year fixed mortgage rate.
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