The mortgage term that fits

A mortgage term is the time the contract between you and your lender lasts before it can be reviewed and renewed. Things like payment frequency, interest rate and the length of your next mortgage term can all be renegotiated when a term ends and a new term’s negotiated. Mortgage terms can last anywhere between 6 months and 7 years.

Here’s a few things to keep in mind when you’re deciding on the length of your next mortgage term.

Interest rate

Longer terms generally come with higher interest rates – it’s the price you pay for predictability. But, that doesn’t mean a shorter term’s always better. If rates are low when you’re negotiating your mortgage term, a long term is a good option because it lets you lock in at that lower rate. If rates are high when you’re negotiating your mortgage term, a shorter term could be a better fit. You get the lower rate to begin with and if rates drop, you can renegotiate a new term sooner and take advantage of those falling interest rates.

Predictability vs. opportunity

  • Longer mortgage terms give you predictability. For a number of years you’ll know exactly how much you’ll pay. There won’t be any surprises and you won’t have to worry about renegotiating your mortgage on a regular basis.
  • With a shorter term, you get opportunity. If rates go down, you win because you can renegotiate sooner. If rates go up, on the other hand, you could end up paying more.

Your situation

Like so many things in life, the best mortgage term for you, depends on you. If you’ll be selling your home soon, a long term doesn’t make a lot of sense because it could leave you with prepayment penalties. When considering your next mortgage term, think about where you are today as well as where you could be throughout the entire mortgage term.

If you have mortgage questions, call our Contact Centre at 1.866.863.6237.