Choosing the right fixed mortgage

If you looking to buy or refinance in the near future then it's not a bad idea to take a closer look at what mortgage term your considering. The big banks have spent a lot of advertising dollars to attract us to sign on for shorter term mortgages (1, 2, 3 and even 4 years). I'd argue given current economic circumstances this may not be the ideal strategy.

Clearly no one knows where the economy and rates are headed but there is some consensus that recovery will arrive in the next two years or so. If you buy into a short term fixed rate then you may be re-signing as rates begin to rise again. That may not be ideal. Currently the seven and ten year fixed rates are very attractive and not much higher than the five year fixed rates. Clearly it’s important to think ahead whether you’re planning on hanging onto the house for the next five years or more.

More and more Canadian statistically break their mortgage before their mortgage term is up. Here are some penalty tips to keep in mind. If take a seven or ten year fixed and you sell or refinance your home five years into your term then penalty to break would only be three months interest penalty. This rule applies to all banks at its part of the Interest Act of Canada. If you think you will break your term before five years then it may be wise to take at least a five year term or less.

If you have a mortgage, debt-related questions or would like to share an experience, feel free to contact me.  Have a great week.