When choosing a Fixed Rate term, borrowers are often inclined to request a 5 year fixed rate term. While there’s numerous reasons for this, many of which are valid.
However, as a Mortgage Broker it is my responsibility to have the conversation with my clients to determine what product/term best fits their needs. I have worked with many clients and in multiple situations when my clients came to me asking for a 5 year Fixed rate but after doing some further consultation we were able to determine that the 5 year Fixed was nowhere near the best product for them.
As a mortgage broker I always want to present my clients with all the possible options for their particular situation and from there make a recommendation as to what may be the best option based on my clients personal situation.
A large percentage of mortgage clients break their mortgage around the 3.5 year mark (on average), for any number of reasons. If those same clients have taken a 5 year term there’s always going to be payout penalties to factor in that can really hurt their situation.
When taking a shorter term, clients are afforded much more flexibility should their financial situations change. If your mortgage comes up for renewal after 3 years instead of 5, that’s 2 less years you have to wait if you want to avoid penalties if you wanted to upgrade your living situation by moving up in properties, maybe downsize, refinance to payout other debts.
The sooner that a mortgage comes up for renewal the sooner you can re-evaluate your financial situation and determine once again at that point which product best fits your needs. A client that was a great fit for a Fixed a few years ago may now be a great fit for a Variable rate mortgage.
Shorter terms often mean lower rates and lower payments.
History has shown that Fixed rates here in Canada are historically lower in times leading up to US Presidential Elections, so consider timing your Fixed terms with these elections every 4 years to give you a better chance of receiving lower rates at renewal.
Taking a shorter fixed term does present some particular advantages, some of which being:
For more information contact:
Phone: (778) 668-9320
Fax: (778) 294-2239
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