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3-year fixed mortgage rates defined for Grande Prairie customers
Around a fifth of Grande Prairie mortgage customers have a mortgage with a term of between two and four years. However, relatively few of these have the 3 year fixed rate mortgage, and even more have never heard of this option. What is a 3-year fixed rate mortgage? And when is it the right choice for you?
What is a 3-year fixed rate mortgage?
A mortgage term is not the same thing as the amortization period. The mortgage term refers to how long you’re obligated to meet the terms of the mortgage contract. Most Canadians renew their mortgage several times over the amortization period, how long it takes to pay off the home loan. You will pay a penalty if you break the mortgage before the loan term is over, whether you refinance or move without “porting” the mortgage.
When does a 3-year mortgage term make sense?
Do you think interest rates will drop in two to three years? Then a three year mortgage term is a better choice than a five year mortgage. If you decide not to change, simply renew the mortgage. However, if you think mortgage interest rates are going to increase over time, lock in current interest rates for as long a term as possible. The penalties involved in breaking your mortgage in locking in new terms may determine whether you choose a 1, 3 or 5 year mortgage.
If you’re probably going to upgrade your home in two or three years, a three year mortgage is a better choice than the five year renewal term.
Who chooses the three year mortgage?
The three year mortgage is more popular with younger mortgage customers. They have a greater risk tolerance, and they aren’t as concerned with locking in interest rates over 10 or 20 years. They’re also used to living in a world where mortgage rates change regularly, rising and falling with the state of the Canadian economy. Furthermore, this age demographic is more likely to see their creditworthiness improve as they pay off loans and enjoy career progression. They may be a much better credit risk in three years and thus qualify for a lower interest rate. Call Grande Prairie Whalen Mortgages today!