{"id":22631,"date":"2023-11-30T08:00:00","date_gmt":"2023-11-30T13:00:00","guid":{"rendered":"https:\/\/www.zolo.ca\/blog\/?p=22631"},"modified":"2026-01-23T12:32:00","modified_gmt":"2026-01-23T17:32:00","slug":"mortgage-term","status":"publish","type":"post","link":"https:\/\/www.zolo.ca\/blog\/mortgage-term","title":{"rendered":"3 vs 5-Year Fixed: What Mortgage Term Is Right For You?"},"content":{"rendered":"\n\n\n<p>Buying a home is full of many exciting and pivotal decisions. For instance, you\u2019ll need to decide which house is right for you, <a href=\"https:\/\/www.zolo.ca\/blog\/how-much-mortgage-can-you-afford\">how much you can afford to spend<\/a>, what city to live in, and where to get your mortgage. Once you have a signed offer and are under contract for your home, you must finalize your mortgage. You probably know that you should shop around for the best mortgage rate, but do you know what mortgage term is best for you?<\/p>\n\n\n\n<p>For many years, a five-year fixed-rate mortgage term was the most popular option for Canadians.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/what-is-a-fixed-rate-mortgage\">What is a Fixed-Rate Mortgage?<\/a><\/p><\/section>\n\n\n\n<p>In 2020, about <a href=\"https:\/\/www150.statcan.gc.ca\/n1\/pub\/11-621-m\/11-621-m2021001-eng.htm\">49% of mortgages<\/a> were five-year fixed-rate mortgages. But over the past year, the <a href=\"https:\/\/www.bankofcanada.ca\/core-functions\/monetary-policy\/key-interest-rate\/\">Bank of Canada<\/a> has raised the policy interest rate significantly, from 0.25% in February 2022, to 4.50% in January 2023. Mortgage rates followed suit, which has caused Canadians to choose shorter mortgage terms with lower mortgage rates to afford their dream homes. As a result, today\u2019s higher interest rates and the potential for <a href=\"https:\/\/www.thestar.com\/real-estate\/2023\/01\/24\/dont-hold-your-breath-on-mortgage-rate-cuts-anytime-soon.html\">lowered interest rates in 2024<\/a> and beyond mean that a five-year fixed-rate mortgage is no longer the default choice.&nbsp;<\/p>\n\n\n\n<p>If you aren\u2019t sure which mortgage is right for you or even what a mortgage term is, keep reading for everything you need to know.<\/p>\n\n\n\n<section class=\"bg-white border-t border-b border-blacklight my-12 md:my-16 sticky md:relative top-0 md:top-auto z-10 md:z-auto alignwide  wp-block-zolo-block-toc \" aria-hidden=\"true\"><div class=\"wrapper relative max-w-2xl mx-auto md:py-8 flex flex-col flex-shrink-0 max-h-screen md:max-h-none\"><input type=\"checkbox\" id=\"toc-toggle\" class=\"hidden\"\/><label for=\"toc-toggle\" class=\"flex justify-between cursor-pointer md:cursor-auto py-4\"><div class=\"toc-title leading-normal font-medium m-0\">In this article<\/div><svg class=\"w-6 h-6 fill-current text-blue md:hidden transition-transform duration-150 ease-in-out\" viewbox=\"0 0 24 24\"><path d=\"M22 12c0-5.5-4.5-10-10-10S2 6.5 2 12s4.5 10 10 10 10-4.5 10-10zM6.9 10.9l1.4-1.4 3.7 3.7 3.7-3.7 1.4 1.4L12 16l-5.1-5.1z\"><\/path><\/svg><\/label><nav id=\"toc-nav\" class=\"zolo-toc-nav max-h-0 md:max-h-full overflow-y-auto scrollbar-hidden overscroll-none\"><ul class=\"zolo-toc-list my-4\"><li><a class=\"entry-title no-underline hover:underline\" href=\"#what-is-a-mortgage-term?\">What is a Mortgage Term?<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#fixed-vs-variable-mortgage-terms\">Fixed vs Variable Mortgage Terms<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#should-you-choose-a-5-year-mortgage-term?\">Should You Choose a 5-Year Mortgage Term?<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#should-you-choose-a-3-year-mortgage-term?\">Should You Choose a 3-Year Mortgage Term?<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#how-to-choose-your-term\">How to Choose Your Term<\/a><\/li><\/ul><\/nav><\/div><\/section>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-is-a-mortgage-term?\">What is a Mortgage Term?<\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"563\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/01\/fixed-rate-mortgage-1024x563.jpg\" alt=\"\" class=\"wp-image-22534\"\/><\/figure>\n\n\n\n<p>Your mortgage\u2019s term is the length of time your mortgage contract is set with your lender. Terms can range from a few months to five years or longer, but the most popular term lengths are two, three, and five years.<\/p>\n\n\n\n<p>The term includes everything outlined in your mortgage contract, including your:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Mortgage interest rate<\/li><li>Monthly payment amount<\/li><li>Prepayment privileges<\/li><li>Penalties for breaking the term early<\/li><\/ul>\n\n\n\n<p>You\u2019ll choose a mortgage term when finalizing your home purchase financing after you have an accepted offer to purchase but before the closing date.<\/p>\n\n\n\n<p>When your mortgage term ends, you can renew your mortgage term with your lender or shop around and get a new mortgage with another lender. At the end of your term, everything in your contract is up for negotiation again, including your interest rate, monthly payments, and the length of your new term.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-term-vs-amortization\">Term vs Amortization<\/h3>\n\n\n\n<p>Mortgage terms are often confused with mortgage amortizations, but the two are entirely different aspects of your mortgage. Here are the key differences:<\/p>\n\n\n\n<div id=\"footable_parent_22633\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_0\" data-footable_id=\"22633\" data-filter-delay=\"1000\" aria-label=\"Mortgage Terms\"            id=\"footable_22633\"\n           data-unique_identifier=\"ninja_table_unique_id_1736853404_22633\"\n           class=\" foo-table ninja_footable foo_table_22633 ninja_table_unique_id_1736853404_22633 ui table  nt_type_legacy_table selectable hide_horizonal_borders hide_vertical_borders striped compact vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_mortgage_term \">Mortgage Term<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_mortgage_amortization \">Mortgage Amortization<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"16640\" class=\"ninja_table_row_0 nt_row_id_16640\">\n            <td>The length of time you are commited to your lender, mortgage rate, and mortgage conditions<\/td><td>The length of time it takes to pay off your entire mortgage<\/td>        <\/tr>\n            <tr data-row_id=\"16641\" class=\"ninja_table_row_1 nt_row_id_16641\">\n            <td>Typically lasts one to five years<\/td><td>Can last up to 25 years if your down payment is less than 20% of the price of your home<\/td>        <\/tr>\n            <tr data-row_id=\"16642\" class=\"ninja_table_row_2 nt_row_id_16642\">\n            <td>Renegotiate at the end of your term<\/td><td>Lengthen or shorten via refinance<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n    \n    \n    \n<\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\" id=\"fixed-vs-variable-mortgage-terms\">Fixed vs Variable Mortgage Terms<\/h2>\n\n\n\n<p>When choosing your mortgage term, you are choosing the length of time that your mortgage contract with your lender lasts. So how do the terms \u201cvariable\u201d and \u201cfixed\u201d factor into this equation?<\/p>\n\n\n\n<p>Variable and fixed mortgage terms refer to the interest rate of your mortgage. So when you hear the phrase \u201cfive-year fixed rate mortgage,\u201d you choose a fixed interest rate for five years. Similarly, a \u201cthree-year variable rate mortgage\u201d means you are choosing a variable mortgage rate for three years.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/fixed-vs-variable-rate-mortgage\">Should You Choose a Fixed vs. Variable Rate Mortgage?<\/a><\/p><\/section>\n\n\n\n<p>A fixed-rate mortgage means that the interest rate will not change during the term, regardless of whether industry mortgage rates fluctuate up or down. Fixed-rate mortgages are a good choice for homebuyers who want the predictability of a monthly locked-in mortgage payment.<\/p>\n\n\n\n<p>Variable-rate mortgages fluctuate as the Bank of Canada\u2019s policy rate (and, therefore, the lender\u2019s prime rate) fluctuates. For example, you may choose a prime + 1.0% variable rate. In that case, your rate will always be 1% more than the prime rate for your entire mortgage term. Variable-rate mortgages are riskier for homeowners because the interest rate can rise and fall. The overall effective interest rates tend to be lower than a fixed-rate mortgage.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"should-you-choose-a-5-year-mortgage-term?\">Should You Choose a 5-Year Mortgage Term?<\/h2>\n\n\n\n<p>Choosing the right mortgage term depends on your financial situation, goals, and risk tolerance. Five-year fixed-rate mortgages, for example, give homeowners certainty about their mortgage rate (and monthly payments) for at least five years, and that peace of mind led to its popularity. Unfortunately, that peace of mind comes at a price, and five-year mortgages tend to have higher mortgage rates.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"http:\/\/zolo.ca\/blog\/how-to-negotiate-mortgage-rates-canada\">How to <\/a><a href=\"https:\/\/www.zolo.ca\/blog\/how-to-negotiate-mortgage-rates-canada\">Negoti<\/a><a href=\"http:\/\/zolo.ca\/blog\/how-to-negotiate-mortgage-rates-canada\">ate Mortgage Rates in Canada<\/a><\/p><\/section>\n\n\n\n<p>Here\u2019s what to consider if you think a five-year term is right for you:<\/p>\n\n\n\n<p>First, consider your plans for your home. Is it a home you plan to live in for at least five years? Ending your mortgage term early can result in expensive penalties, so if you plan to move within five years, it\u2019s best to choose a shorter term.<\/p>\n\n\n\n<p>Second, consider the mortgage rate your lender offers for a five-year mortgage. A higher mortgage rate translates into a higher monthly payment. If you think rates will fall within the next five years (and some experts have said this is likely), you may end up paying a higher mortgage payment for longer than necessary.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"should-you-choose-a-3-year-mortgage-term?\">Should You Choose a 3-Year Mortgage Term?<\/h2>\n\n\n\n<p>A shorter mortgage term gives you less certainty about the rate you\u2019ll pay but has the benefit of flexibility. If you aren\u2019t sure whether your money, job, or living situation will change in the next five years, a shorter term could be a better option.<\/p>\n\n\n\n<p>Shorter mortgage terms aren\u2019t as expensive if you need to break the mortgage contract early, a penalty that could otherwise cost you tens of thousands of dollars.<\/p>\n\n\n\n<p>Shorter mortgages traditionally give you access to lower mortgage rates because they are less risky for the lender (since they aren\u2019t making predictions about interest rates over a long period.)<\/p>\n\n\n\n<p>Current mortgage rates are some of the highest we\u2019ve seen in 15 years. If you think rates will drop in the next few years, a shorter term will let you take advantage of lower rates sooner.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-to-choose-your-term\">How to Choose Your Term<\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"683\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/01\/what-is-a-fixed-rate-mortgage-1024x683.jpg\" alt=\"\" class=\"wp-image-22535\"\/><\/figure>\n\n\n\n<p>Choosing your term is essential to home-buying, but it doesn\u2019t need to be complicated. Here\u2019s a quick guide to help you choose.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Shorter Term (Two or Three Years)<\/h3>\n\n\n\n<p><strong>Best For:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Flexibility<\/li><li>Those planning to move within five years<\/li><li>Lower mortgage interest rates<\/li><li>Smaller breaking penalties<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Longer Term (Five Years)<\/h3>\n\n\n\n<p><strong>Best For:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Stability<\/li><li>Those planning to stay put for five years<\/li><li>Insulation against changing mortgage rates<\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"<p>3-year or 5-year? The right mortgage term depends on your financial circumstances<\/p>\n","protected":false},"author":91,"featured_media":22632,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"guide":[],"class_list":["post-22631","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying"],"acf":[],"zolo_excerpt":"","_links":{"self":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/22631","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/users\/91"}],"replies":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/comments?post=22631"}],"version-history":[{"count":6,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/22631\/revisions"}],"predecessor-version":[{"id":24045,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/22631\/revisions\/24045"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media\/22632"}],"wp:attachment":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media?parent=22631"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/categories?post=22631"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/tags?post=22631"},{"taxonomy":"guide","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/guide?post=22631"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}