Find the best 3-year fixed mortgage rate

The '3' in a 3-year mortgage rate represents the term of the mortgage, not to be confused with the amortization period. The term is the length of time you lock in the current mortgage rate, while the amortization period is the amount of time it will take you to pay off your mortgage. The term acts like a reset button on your mortgage, at which point you must renew the mortgage at a rate available at the end of the term. A mortgage might, for example, have a 3-year term and a 25-year amortization period.

When the mortgage rate is 'fixed' it means that the rate (%) is set for the duration of the term, whereas with a variable mortgage rate, the rate fluctuates with the market interest rate, known as the 'prime rate'. So, for example, if the 3-year fixed mortgage rate is 4%, then you will pay 4% interest throughout the term of the mortgage.

It's worth noting that all borrowers, even those applying for a 3-year term, will need to meet the standards of approval for the 5-year mortgage rate. This is a standardized benchmark applied to reduce the risk for the lender and to give the borrower some breathing room.

We make it simple to see current mortgage rates from all of Canada’s leading mortgage providers in one place. We have rates from the big banks, credit unions and smaller lenders across the country. This makes it easy to see who offers the best rates in Canada in real-time, at no cost to you.

You can think of the difference, or spread, between variable mortgage rates and fixed rates as the price of insurance that mortgage costs will not increase in the next five years, more or less. The advantage of fixed-rate mortgages is that you know exactly how much your mortgage payments will be regardless of whether rates rise or fall. You can, essentially, set it and forget it. This eases the budgeting anxiety that may follow a variable rate mortgage.

When interest rates are low, and the spread between shorter-term rates and the 5-year fixed mortgage rates is less significant, it is typically recommended that you lock in the 5-year rate. The longer term offers stability and, because rates are historically low, the chances of rates decreasing further with a variable rate are greatly reduced.

On the other hand, as is the case with all fixed mortgage rates, there is the potential to pay higher interest when variable rates are low, and, examined historically, variable rates have proven to be less expensive over time.

3-year mortgage terms aren’t necessarily better than other terms. You should pick a term length based on your financial needs and current situation, as well as what rates are on offer. 5-year terms are the most popular in Canada, as they offer a compromise between stability and flexibility. However, if flexibility is important to you, a 3-year term could be worth considering.