When It Comes To Your Mortgage, Don't Forget To Consider The Term

BNN ~ February 20th, 2017

OTTAWA -- You shopped around for the best deal on your mortgage and weighed the pros and cons of going with a fixed-rate or a variable-rate loan, but another key factor to consider is the term.

A majority of borrowers opt for a five-year mortgage -- about 54 per cent according to Mortgage Professionals Canada -- but experts say homebuyers need to consider how long they want to commit to when it comes to their loan.

James Laird, co-founder of interest rate-comparison website RateHub, says when people are buying a house and signing a mortgage it can feel like nothing is going to change for the next 10 or 20 years, so signing for a five-year term may seem like it's no big deal.

"But life is a bit different than that," Laird said, as relationships and jobs can change.

"Sometimes it is new relationships forming where someone buys a condo, gets a five-year fixed-rate, but then they meet someone and get married... That usually dictates a change in the residency that they have and the mortgage is broken."

"That can really set you back," he added, noting that penalties for breaking a fixed-rate loan will be more severe than those for terminating a variable-rate.

While mortgages in Canada generally have terms of one to 10 years before the remaining balance needs to be renewed, refinanced or paid in full, Laird said the average Canadian will only have their mortgage for 3.8 years.

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