3-year fixed mortgage rates clarified for Lethbridge clients.
What is a 3-year fixed rate mortgage?
A 3-year fixed rate mortgage has a fixed interest rate for three years. This isn’t the same thing as trying to pay off the mortgage in three years. The amortization period of the home loan could be anywhere from 5 to 25 years. That is the time it takes to pay off the entire loan balance.
The three year fixed rate mortgage is a more popular choice than the one year fixed rate mortgage. Roughly one in twenty people choose a 1 year loan term. About one in five choose a loan term of 2 to 4 years. Note that you can renew the loan at the end of three years, including for another three year mortgage term.
What determines the three year mortgage rate?
The three year mortgage rate is generally set based on 3-year government bond yields at the time that the mortgage is issued. This means you have a better basis for predicting the interest rate of a three year mortgage term than a five year mortgage term.
The interest rate you’re offered will also be based on the credit risk lenders think you are. If you have bad credit, you’ll be offered a higher interest rate than someone with a good credit history. You may have a higher loan origination fee for a fixed rate mortgage than a variable rate mortgage, but you gain certainty with regard to your mortgage payments, as well.
Who should take out a 3 year fixed rate mortgage?
Three year mortgages are a good choice if you think you’ll move or upgrade homes in the next two to four years. They are a viable option if you think interest rates will decline over time, but you have more stability than a one year mortgage. If you’re breaking or refinancing your mortgage, one point in favor of a three year mortgage is that it may have lower premiums. Call Your Trusted Lethbridge Mortgage Brokers at Whalen Mortgages Lethbridge to lock in your mortgage rate.