Fixed Rate Mortgages: What's Best: a 10 or 5 Year Term?

This is a question I've heard a number of times when discussing all the options with clients. Especially now when rates are still at historically low levels. It always comes down to what your goals are; short and long term. Usually the longer the term the bigger the penalty if you need to break the term for one of several reasons people do so.
Canadian Mortgage Trends recently put out an article to help make the decision. They did a study comparing the 2 mortgage terms. See below for the full article:

After our 10 year mortgage story, one of our readers posed the question of how often 10-year mortgages were a better choice than 5-year mortgages.

We did a study on this a few years ago and decided to update it for this story. 

To see how 10-year terms sized up, we:

  • Looked at all available 5-year fixed rate data back to 1967--the earliest 5-year data readily available.*
  • Added a 1.25% premium to 5-year fixed rates to arrive at an approximation of 10-year rates.
  • Compared the 10-year rate to the average five-year rate a borrower would have received for two consecutive 5-year terms.

The data showed that homeowners would have come out ahead by choosing the 10-year term in only 49 out of 508 months.

While not a strictly scientific result, this statistic (1 out of 10), is similar to findings in the prominent fixed vs. variable studies. In other words, it appears borrowers don't win long-term by paying big rate premiums for "safety."

Some people will nonetheless say it’s different this time, and feel it’s worth paying 1.25% more for five extra years at a pre-determined interest rate. 

There’s no denying that rates are at all-time lows today. Moreover, the odds of rates rising in the short to medium term appear greater than the odds of rates falling. 

Nonetheless, the available data and modern low inflation monetary policy both support the premise that 10-year mortgages are too expensive.  Therefore, for most, it appears wise to avoid them."

Tony Marchigiano1-155 Water Street
Mortgage BrokerVancouver, BC
cell: 604 505 7109
fax: 604 909 4666


*indicates required fields.

Meet the team

  • Will Pratt
  • Justin Sabbagh
  • Mike Wilcox

Mortgage Calculator

Purchase Amount:
Down Payment:
Interest Rate:
Payment Interval:
Mortgage Term (Years)
Total Payments:
Total Amount Paid:
Total Interest Paid: