3-year fixed-rate mortgages in Ontario aren’t the most popular, but they make sense in certain circumstances. About 20% of Canadians have mortgage terms ranging between 2 and 4 years. This figure is slightly higher in the case of younger people. However, the most popular mortgages in the country (66%) have fixed rates. 3-year fixed-rate mortgages have constant interest rates for a period of 3 years. This is your mortgage term, the locked-in rate for three years. It is different to the amortization period, which is the amount of time you can take to repay your mortgage. Your mortgage term is the point at which you can renew your mortgage rate.
Advantages of 3-year fixed-rate mortgages in Ontario
Perhaps the biggest advantage of 3-year fixed-rate mortgages is that you know how much your mortgage payments will be. Also, you don’t have to worry about changes in interest rates. You can plan your budget, set mortgage payments aside, and forget about it. These mortgages are the lowest cost option if you want to lock in their interest rates for a long term. Buyers should also have no intention of refinancing the mortgage or increasing the payment before three years. In addition, longer-term fixed rate mortgages cost borrowers more interest than short-term and variable-rate mortgages. Also, when buyers switch to 3-year fixed-rate mortgages, most lenders are willing to pay the appraisal and legal fee.
Disadvantages of 3-year fixed-rate mortgages in Ontario
Perhaps the biggest disadvantage is that fixed rate mortgages have much higher penalties for early termination. Major banks calculate penalties using the bank’s current rate, which can be quite harsh.Compare All 3-Year Fixed-Rate Mortgages