Did You Know About the Five Year Fixed Rate Mortgages in Canada?
Most mortgage borrowers prefer mortgages that extend for more than a decade, hence there is little knowledge about the five year fixed rate mortgages in the Canadian mortgage market. The other type of mortgages may have variable or adjustable rate mortgages wherein the rate of interest varies with respect to a base agreed upon in the agreement. But in a five year fixed rate mortgage you monthly payment will remain fixed over the total five year period.
At the end of a fixed rate five year mortgage, either your mortgage is totally paid back or you are moved to an SVR by your mortgage, where SVR refers to Standard Variable Rate category. The SVR here could be higher or lower than your fixed rate of mortgage. If you are willing to go for a mortgage which has short duration, a fixed rate five year mortgage is surely the choice.
A Five Year Fixed Rate Mortgage come with benefits which are much thought provoking for any mortgage borrower:
Lower interest rate
Interest rates are lower for shorter periods when compared to longer periods. So, in a fixed rate five year mortgage, you will be able to command lower interest costs, and also get your mortgage renewed at the end of the five year term, in case you want more time to repay your mortgage.
Certainty in finances
When you need to project your finances for the near term future, or longer, you have your interest cost fixed and determined as it is a fixed rate five year mortgage. Even if the interest rates rise in Canada, your mortgage shall remain untouched.
Scope for availing opportunities
If your interest costs are fixed and you are able to project your cash flows and income properly, there is scope for more mortgages in the future. In a Variable Rate Mortgage, as the interest costs are variable, one may not be able to ascertain certain figures that are needed to present while applying for a loan, and lose out the edge on availing a loan.