Best 5-Year Fixed Mortgage Rates
In a 5-year mortgage, your monthly mortgage repayments won’t change for five years. Even if base interest rates or standard variable rates change, you’d still be paying the same interest rate when you took out the loan.
Today's Lowest 5-Year Fixed Rate
- Updated: July 27, 2023
4.84%
5-Year Fixed
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How to Find the Best 5-Year Fixed Mortgage Rates
Are you scouting for a fixed mortgage loan that has the best deal for your home purchase?
The various types of mortgages available in the market may make it confusing to choose the right one for your needs. To help you make an informed choice, let’s go over the most common loan – the Fixed-Rate Mortgage.
What Is a Fixed-Rate Mortgage?
A fixed-rate mortgage is an amortizing loan where the interest rate stays the same for a specified duration of the loan. Today, it’s the most popular loan for home mortgages as it allows homeowners to manage their budgets much easier. Moreover, fixed-rate mortgages come in terms of 1, 2, 3, 5, 7 or 10 years.
5-Year Fixed Mortgage Rate
At the end of five years, your mortgage will revert to your lender’s SVR. Often, this rate is higher than your fixed rate. But you can avoid such steep monthly repayments after the fixed term ends by remortgaging. In doing so, you lock in a lower interest rate when you remortgage. Plan to do this at least six months before your fixed-rate mortgage ends.
Fixed-Rate Mortgage Pros and Cons
Like all other types of mortgage loans, fixed-rate mortgages have their advantages and disadvantages. Carefully consider these pros and cons to help you decide whether it fits your needs.
Pros
- Fixed-rate mortgages provide a good balance between security and cost.
- The monthly repayments stay the same throughout the term so it’s easier to manage your budget.
- You gain financial security knowing that monthly mortgage repayments won’t change.
Cons
- Fixed-rate mortgages have higher interest rates. The longer the term, the higher the monthly repayments.
- In a 5-year fix, you could end up paying thousands of dollars more in interest than in a 2-year fix.
- You lose flexibility. If interest base rates are reduced, you’d be stuck on a higher rate of interest until the end of your fixed term.
How to Find the Best Fixed-Rate Mortgage
There’s no fixed-rate mortgage that’s best for everyone. But there’s a fixed-rate mortgage that can best meet your unique requirements. Here are some tips to find the one that’s most suitable for you.
Assess your financial situation
Know your specific needs and financial capacity. Determine the maximum amount you can pay upfront and the amount that you can sustain for monthly repayments. Then, find deals that match these amounts.
Keep in mind that the bank will repossess your home if you can’t keep up with repayments. So, it’s best to choose a term that’s sustainable for you.
5-Year Fixed Mortgage Rate History
When comparing offers from different banks or lenders, look at their interest rates and setup fees. The best 5-year deal would be the one that costs you the least amount of money over 5 years.
If you’re switching mortgages, you must also factor in valuation, conveyance, and home survey fees. These additional fees will be added to the mortgage amount, incur interest, and increase your monthly repayments.
Find the right fixed length
Comparing different terms from different banks can be daunting. But Ratestead makes it easier for you to compare mortgages using filters based on location, terms and downpayment amount.
To find the best 5-year fixed mortgage rates, you can go over these listings.
Will I get the best deals on 5-year fixed-rate mortgages?
As we’ve mentioned, the best mortgage deal is the one that’s most appropriate for your unique situation. Choosing 5-year fixed-rate boils down to whether you need financial security for 5 years. Remember, the shorter the term, the better interest rates you can avail yourself. Consequently, the lower your total cost would be.
So, assess your current financial situation, and project what it would be five years from now. That would give you a better idea of whether a 5-year fixed-rate mortgage is best for you.
5-Year Fixed Mortgage Rates
5-year fixed mortgages are slowly becoming the most popular mortgage term in Canada for three obvious reasons.
- These mortgages are the lowest cost option available for those who want to lock in their payment and interest rates for a long term.
- You can opt for a fixed-rate mortgage if you have no intention of refinancing or increasing the payment before 5 years.
- With 5-year fixed-rate mortgage, you can qualify for a mortgage at the rate you can pay, which is known as the contract rate. Remember that most lenders require 1 to 4-year terms to prove that buyers can afford payments at the 5-year fixed rate.
5-year Fixed Mortgage Basics
5-year mortgage rate represents your mortgage term and it should not be confused with the amortization period. Your mortgage term is the time period for which your current mortgage rate will be locked. An amortization period, on the other hand, 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. Typically mortgages have a 5-year term and a 25 year amortization period. When a mortgage rate is fixed, it means that a certain percentage rate is decided for the duration of the term. A variable mortgage rate means that your mortgage rate fluctuates with the changes in the interest rates of the market. For example, if your 5-year fixed mortgage rate is 2.35%, you are required to pay an interest of 2.35% over the entire term.
Comparing 5-year Fixed Mortgage Rates – The Good and the Bad
Perhaps the biggest advantage of 5-year fixed-rate mortgages is that you know how much your mortgage payments will be and you don’t have to worry about changes in interest rates. You can plan your budget, set mortgage payments aside and forget about it. This, however, is not the case with variable rate mortgage. When interest rates are low, it is recommended to lock in 5-year fixed mortgage rates. The five-year term offers stability as the chances of interest rates decreasing further are fairly low. An important thing to remember is that there is a chance you will pay higher interest rates on fixed mortgages if variable rates are low.
Are There Any Disadvantages?
Five-year mortgages do have a downside:
- Perhaps the biggest disadvantage is that fixed-rate mortgages have much higher penalties for early termination. Penalties by major banks can be harsh, as they are calculated using the bank’s current rate and not the actual interest rate.
- Fixed-rate mortgages over a long-term cost borrowers more interest than short-term and variable mortgages.
Is There Anything More I Need to Know about Fixed-rate Mortgages?
- Almost half of all mortgages in Canada have a 5-year fixed term
- Almost 3 out of 4 mortgage shoppers choose 5-year fixed mortgage rates if the spread between a variable and fixed rate is less than 0.5%.
- When you switch to 5 years fixed mortgage, most lenders will be willing to pay your appraisal and legal fee.
* Listing data is provided under copyright by the Toronto Regional Real Estate Board (TRREB). The information may only be used for informational purposes and must not be utilized in commercial activities or other improper uses, as it could cause legal issues. However, this data has been deemed reliable but not guaranteed accurate by TRREB nor Ratestead representatives because they do their best to ensure accuracy while relying on multiple sources without independent verification.
** Contains information licensed under the Open Government Licence – Ontario.
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