Best 6-month fixed mortgage rates
What are 6-month fixed mortgage rates
Mortgages come in a variety of different term lengths, with 6 months being the shortest term available. Your term is not the total length of your mortgage but is the amount of time you're tied to a particular lender. The advantage of a short mortgage term is that it lets you change your mortgage lender and mortgage features in a short amount of time. Longer terms, by definition, will lock you in for a longer period of time. 6-month fixed-rate mortgage terms can come with either open or closed rates, and come with a conversion option.
Are 6-month mortgage rates higher than other rates?
Because a 6-month mortgage is a niche product, rates tend to be higher than they are for more traditional mortgage terms. Even mortgages with a relatively similar term length, like 1-year mortgage terms, can be significantly lower than 6-month mortgage rates. Use the table at the top of this page to see current mortgage rates for various different term lengths.
Open vs. closed fixed rates
6-month fixed mortgage rates can come as either a closed or open rate. A closed rate will not allow you to make additional payments during your term or break your mortgage before the term is over. Doing either of these will result in prepayment penalties. That said, many 6-month closed mortgages are also convertible - there's more on that below. An open term, on the other hand, allows you to pay off as much of your mortgage as you want at any time. Open mortgages do come with much higher rates, however, so you're paying extra for their flexibility.
What are convertible rates?
Many banks offer 6-month mortgage rates with a 'convertible' or 'flexible' option. A 6-month convertible mortgage will give you the option to convert your mortgage to a longer term with your lender at any time. Because 6-month terms generally have higher rates, the option to convert your mortgage to a longer term with a lower rate is good to have. Not all lenders offer convertible mortgages, so be sure to check with them ahead of time.
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Jamie David, Sr. Director of Marketing and Mortgages
6-month mortgages are not incredibly common in the Canadian market, but they are a great tool for specific situations, especially when some short-term flexibility is required. Read on to understand when a 6-month mortgage term makes sense.
When do you need a 6-month mortgage?
The main use case for a 6-month mortgage term is when you need some short-term flexibility with your mortgage. For example, if you were planning to sell your home in the next six months, a 6-month mortgage term could minimize your exposure to the significant prepayment penalties associated with breaking a mortgage before the term is over. A 6-month mortgage might also be what you need to tie yourself over between two longer mortgage terms if you're not yet ready to commit to your new term.
Pros of a 6-month mortgage
Here are a few of the benefits of taking out a 6-month mortgage:
- Maximum flexibility
- Available with open rates for even more flexibility!
- Often available with the option to convert to a longer term at any time
Cons of a 6-month mortgage
As with all things, 6-month mortgages also have some drawbacks. Here are the main cons of 6-month mortgages to consider:
- Higher mortgage rates than more traditional mortgage terms
- Don't allow you to lock in a low rate for a long time
Alternatives to a 6-month mortgage term
If you're looking for an extremely flexible mortgage, then there are a couple of alternatives to a 6-month mortgage term. Firstly, you could opt for an open mortgage rate, of any term length. The downside of this is that open mortgage rates are far more expensive than closed mortgage rates, so this is an expensive option.
CThe other main alternative to a 6-month mortgage term, assuming you're primarily after flexibility, is to opt for a variable mortgage rate. With a variable mortgage rate, breaking your mortgage early will result in a lower pre-payment penalty than you would have received with a fixed rate.
Jamie David, Director of Marketing and Head of Mortgages
Jamie has 15+ years of business and marketing experience. She contributes her mortgage expertise to The Globe and Mail and authors Ratehub’s mortgage and homebuying guides. read full bio