Your mortgage term is one of the most important decisions you'll make—it determines how long your rate is locked in, when you'll need to renew, and how much flexibility you have. Here's how to choose the right term for your situation.
Understanding Mortgage Terms
First, let's clarify terminology:
- Term: The length of your mortgage contract (typically 1-10 years)
- Amortization: The total time to pay off your mortgage (typically 25-30 years)
Example: You might have a 5-year term within a 25-year amortization. At the end of 5 years, you renew for a new term.
Available Term Options in 2026
| Term | Current Rate Range | Best For | ------ | ------------------- | ---------- | 1 year | 5.49% - 5.99% | Short-term needs, expecting rate drops | 2 year | 4.49% - 4.99% | Expecting rate drops in 2+ years | 3 year | 4.19% - 4.69% | Balanced flexibility | 5 year | 3.89% - 4.49% | Most borrowers, stability | 7 year | 4.49% - 4.99% | Long-term stability seekers | 10 year | 5.29% - 5.79% | Maximum payment certainty | Rates approximate for Q4 2025 - check current rates
Short Terms (1-3 Years): Pros and ConsAdvantages
Disadvantages
Who Should Consider Short Terms
Consider Your Term CarefullyGet pre-approved today and we'll help you choose the optimal term for your specific situation and goals. Long Terms (5+ Years): Pros and ConsAdvantages
Disadvantages
Who Should Consider Long Terms
The Penalty Factor: Critical ConsiderationPenalties for breaking your mortgage can be substantial and vary dramatically: Fixed Rate Penalty CalculationGreater of:
|
Mortgage Balance | 3-Year Remaining | Potential IRD Penalty | ----------------- | ------------------ | ---------------------- | $400,000 | 3 years | $12,000 - $20,000+ | $500,000 | 3 years | $15,000 - $25,000+ |
Variable Rate PenaltyTypically just 3 months' interest: |
Mortgage Balance | 3 Months Interest | ----------------- | ------------------- | $400,000 at 5% | ~$5,000 | $500,000 at 5% | ~$6,250 | The takeaway: If you might move, refinance, or access equity before term end, factor penalties into your decision.
Consider Your Term CarefullyGet pre-approved and we'll help you choose the optimal term. Get StartedLearn more about mortgage penalty calculations. The 2026 Rate EnvironmentWhat's Happening Now
Strategic ConsiderationsIf you believe rates will stay stable or rise:
If you believe rates will drop further:
Term Strategy by Situation |
Situation | Recommended Terms |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| First-time buyer, planning to stay | 5-year fixed | |||||||||||||||||||||||||||||||||||||||||||||||
| Might sell in 2-3 years | 2-3 year fixed or variable | |||||||||||||||||||||||||||||||||||||||||||||||
| Self-employed with variable income | 5-year variable (lower penalty) | |||||||||||||||||||||||||||||||||||||||||||||||
| At maximum affordability | 5-year fixed (payment certainty) | |||||||||||||||||||||||||||||||||||||||||||||||
| Expecting major life changes | Shorter term or variable | |||||||||||||||||||||||||||||||||||||||||||||||
| Refinancing soon | 1-2 year or variable |
FAQ
Q: What term do most Canadians choose?
A: The 5-year fixed remains most popular (about 60% of borrowers), though 2-3 year terms have gained popularity in the current rate environment.
Q: Should I match my term to my plans?
A: Yes! If you know you'll sell in 2 years, don't take a 5-year fixed (penalties). Consider a 2-year term or variable.
Q: Can I switch from variable to fixed mid-term?
A: Most variable mortgages allow conversion to fixed anytime without penalty. You'll get the current fixed rate for the remaining term.
Q: What if I'm unsure about my plans?
A: Variable rate offers most flexibility (3-month penalty). Alternatively, a shorter fixed term reduces penalty exposure.
Q: Are longer terms (7-10 years) worth it?
A: Rarely. The rate premium is significant, and penalties are enormous if you break early. Very few people stay in the same mortgage for 10 years.
What's Next
The right term depends on your personal situation, risk tolerance, and plans. Talk to our team for personalized term recommendations based on your specific circumstances.
Get Expert Term Advice
Our team will help you choose the optimal term length for your specific situation and goals.
