Real Estate

Lower Vs Higher Term Mortgage

  • Last Updated:
  • Dec 30th, 2019 9:57 am
[OP]
Member
Sep 15, 2018
235 posts
40 upvotes

Lower Vs Higher Term Mortgage

Hi. My mortgage advisor has offered me a slightly lower rate for 3 and 4 year terms fixed in comparison with a slightly higher rate for a 5 year term fixed.

My question is, are there any fees associated with renewing a mortgage? Just wondering if it’ll be worth renewing every 4 years at a slightly lower interest rate versus the slightly higher interest rate with the 5 year term.

Thanks.
4 replies
Deal Fanatic
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Sep 13, 2011
5510 posts
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Toronto
Kyle12345 wrote: Hi. My mortgage advisor has offered me a slightly lower rate for 3 and 4 year terms fixed in comparison with a slightly higher rate for a 5 year term fixed.

My question is, are there any fees associated with renewing a mortgage? Just wondering if it’ll be worth renewing every 4 years at a slightly lower interest rate versus the slightly higher interest rate with the 5 year term.

Thanks.
If you are renewing your mortgage with the same lender, then there are no fees. If switching to another lender, then it's generally just the discharge fee, which is around $300 (in Ontario. It differs from province to province. BC for example is usually $75, and Alberta is $0). If you are in a collateral mortgage however, there are sometimes legal and appraisal fees involved. Around $1,100 in total. Some lenders will cover some or even all of these fees, however rate can be about 0.05% higher. A collateral mortgage would be any mortgage that has a second component such as a HELOC attached to it, or any new mortgage with TD, Tangerine or National Bank (regardless of whether there is a HELOC or not). Other than that, most mortgages are registered as a standard charge, so the only cost would be the discharge fee.

That being said.... the best deals are usually with 5 year terms these days. So either you're being offered a really great deal on a shorter term mortgage, or you're being quoted too high to begin with.

Can I ask which lender you are dealing wth and what rate you are being offered? Is this for a purchase or do you have a mortgage coming up for renewal?
Paul Meredith
Mortgage Broker, Author
(lic. 10532)
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Aug 11, 2019
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Toronto
4 years. 100%.
Full Time Realtor
GTA & Surrounding Areas
[OP]
Member
Sep 15, 2018
235 posts
40 upvotes
Dayravi wrote: 4 years. 100%.
May I ask what is your reason why you would choose 4 years over the 5 years? Thanks.
Jr. Member
User avatar
Aug 11, 2019
165 posts
175 upvotes
Toronto
Kyle12345 wrote: May I ask what is your reason why you would choose 4 years over the 5 years? Thanks.
Statistically most borrowers discharge/renegotiate their mortgage by year four.
(According to RateSpy)

If your financial picture will be the same or better in 4 years, then for the most part you don't have much to worry about a big difference in 4 years vs 5 years.

None of us can predict the future and say rates in 4 years when you negotiate a renewal will be better than rates in 5 years.
Full Time Realtor
GTA & Surrounding Areas

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