CURRENT RATES

5 Year Mortgage Rates
Term TypeRatePromo & Info
5 YearFixed (standard)2.49%
5 YearFixed (promo)2.29%-*call for restrictions
-High Ratio Only
-Meet property guidelines
5 YearFixed (promo)2.49% & -Condo Doc Review, Reimbursement $500 *call
5 YearVariable (promo)2.10%
* Subject to change without notice *OAC *Some Underwriting Restrictions Apply
Our Mortgage Rates
TermTypeRate
2 YearFixed2.19%
3 YearFixed2.29%
4 YearFixed2.39%**High Ratio Only
5 YearFixed2.29%**restricted, call for details
6 YearFixed2.99%
7 YearFixed2.99%
10 YearFixed3.54%

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WHY A 5 YEAR MORTGAGE RATE?

A 5 year mortgage rate can be a combination of things to a borrower that neither a longer nor a shorter mortgage term can accomplish. Interest rate certainty over five years, meaning that you are not exposed to interest rate risk for the term of your mortgage is a major benefit as fixed rate mortgages offer a Guaranteed Interest Rate throughout their term. In the case of a five year mortgage term you hit the sweet spot with a mortgage rate that is attractive and keeps payments low, as well as reducing your interest rate risk with a medium length fixed rate term.

We all like to plan for the future, but sometimes it’s hard to predict the future, especially if it is looking ahead for an extended period of time. It’s much easier to evaluate where you are 5 years into the future than say 10 years. When it relates to real estate and mortgages, purchasers requiring a mortgage – The Mortgagor – may not be sure that they will keep their home more than 5 years either because of a growing family, increasing income, or career plans, and, as such, taking a higher rate on a 10 year mortgage for security so far into the future does not make financial sense. Alternatively, a family that knows they will be in a home for 5 years may not want to assume the risk of Mortgage Renewal in 2 years’ time as would be the case with a shorter mortgage term. If money is tight and you are on a budget being exposed to a higher interest rate in 2 years upon renewal could cause financial hardship.

You’ve all heard of Time Value of Money I’m sure and the statement that money today is
more valuable than money received in the future? The basis of this is the devaluation of
money over time due to inflation, and the ability to invest money that is received today
allowing a rate of return or Return on Investment. The rate of return you receive over
time would make the money you received today more valuable than if you were to
receive the same amount of money in say 1 or 2 or 3 years as the return on your
investment is added to your savings.

Applying some of this knowledge to your mortgage you may work out the difference in
your mortgage payments and ask yourself if securing a longer mortgage term is worth
the extra money it costs you today. You might refer to the forgone savings on the longer
mortgage term as the Opportunity Cost.

Example: $500,000 mortgage, 25 year amortization, 10 year rate 4.69%, 5 year rate 3.39%

  1. 5 year mortgage rate of 3.39%

    Payment = $2,467.41
    Payments over 5 years’ time = $148,044.60
    Balance in 5 years’ time = $430,527.42

     

  2. 10 year mortgage rate of 4.69%

    Payment = $2,820.42
    Payments over 5 years’ time = $169,225.20
    Balance in 5 years’ time = $440,351.65

Mortgage Term
Monthly Payment
Total Payment I Over 5 Years
Total Interest Payment Over 5 Years
Total Principal Payment Over 5 Years
Balance of Mortgage in 5 Years
10 Year Mortgage (4.69%)
$2,820.42 $169,225.20 $109,576.85 $59,648.35 $440,351.65
5 Year Mortgage (3.39%)
$2,467.41 $148,044.60 $78,572.02 $69,472.58 $430,527.42
5 Year Rate SAVINGS
$353.01 $21,180.60 $31,003.98 $9,824.23 $9,824.23

Comparing the two

  • In this scenario the difference in monthly payments is $353.01 per month greater if the mortgagor chooses the 10 year term
  • Over 5 years the payments on the 5 year mortgage rate would save the borrower $21,180.60 which could be invested each month when saved
  • At the end of the 5 year term the borrowers balance would be $9,824.23 less at $430,351.65 if he/she chose the 5 year mortgage rate
  • If the borrower cannot see past 5 years into their future, and they prefer to save money in the present with lower payments, then you can see that the numbers make sense!

The Question Mark?

The big question is: What will interest rates be in 5 years when it is time for renewal?
Borrowers that want to remove all doubt, and avoid renewing at a higher rate will
default to the 10 year mortgage rate to avoid any risk in 5 years, while borrowers
looking to accelerate repayment of their mortgage, and reduce their monthly payment
will choose the 5 year mortgage rate.