Best 7-year fixed mortgage rates
What are 7-year mortgage terms?
The mortgage term refers to the amount of time that you agree to be bound by the conditions of your current mortgage. When your term is up (in this case, after 7 years) you'll have the opportunity to renew your mortgage with your current mortgage provider or switch to a new one. 7-year terms are longer than average - in Canada the most common term length is 5 years. While a 7-year fixed-rate term does hold you to a single mortgage for a long time, it also lets you lock in a guaranteed mortgage rate for that entire time. If mortgage rates are currently low, a 7-year fixed-rate mortgage might be worth considering.
What are fixed rates?
7-year mortgage terms are generally only offered with fixed mortgage rates. Fixed mortgage rates stay the same for the length of your mortgage term, which means that your regular payments will not change. This is great if you want to keep a steady budget and know exactly how much your mortgage will cost you each month. The alternative to a fixed rate is a variable rate (generally available in 1, 3, and 5-year terms) which fluctuates along with your lender's prime rate. While variable rates are historically lower over the long-term, fixed rates are more popular in Canada.
Are 7-year fixed-rate mortgages better than other terms?
7-year fixed-rate mortgages aren't necessarily better or worse than other mortgage types, it really depends on what you need from a mortgage. If you're looking to lock in a low mortgage rate for a long time, then a 7-year term might be worth considering. However, you might also want to consider whether a 5-year fixed term might suit you as well. 5-year rates are generally lower than 7-year rates, while still offering the opportunity to lock in that rate for a relatively long time.
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Jamie David, Sr. Director of Marketing and Mortgages
Taking out a mortgage is always a big commitment - your home is typically your largest asset, and your mortgage will probably be with you for decades. As a result, it's important that you find the right mortgage for your needs. Luckily, there are a lot of different types of mortgages in Canada!
The 7-year fixed-rate mortgage isn't the most common mortgage type, but it can be compelling for the right customer. Read on to understand what sets 7-year fixed mortgage rates apart and whether they're the right choice for you.
7-year fixed mortgage rates: Quick facts
- Mortgage rates are fixed over a 7-year term
- 74% of Canadians have fixed mortgage rates (Source: Statistics Canada)
7-year fixed mortgage rates explained
A 7-year fixed-rate mortgage is a relatively long mortgage term, with a rate that stays constant for the entire 7 year period. This means that whatever mortgage rate you're approved for at the start of your mortgage term will be with you for 7 years.
Of course, that can be a good or bad thing. If rates drop during your mortgage term, you'll end up paying more than you would have if you had a variable-rate mortgage. Alternatively, if your financial position gets better after a few years, you won't be able to requalify for a lower rate, which you might have been able to do with a shorter term. Conversely, rates could rise or your financial position could worsen, which would generally leave you better off than you might have been with a different mortgage.
Whatever mortgage you decide to apply for, there's some speculation required, which will open you up to more or less risk. That's why it's so important to fully understand the mortgage products available to you.
Pros of a 7-year fixed-rate mortgage
- Lets you lock in a rate for a long time
- Your mortgage payments will be steady for the entire mortgage term
- If market rates increase, you'll still pay your lower rate
Cons of a 7-year fixed-rate mortgage
- A long term gives you little flexibility to change your mortgage within your term
- If prime rates decrease, you'll be stuck paying a higher rate
- 7-year fixed rates are generally higher than 5-year fixed rates, which are more popular
- Breaking your mortgage early can result in significant prepayment penalties
7-year mortgage rates vs. other term lengths (interactive graph)
Fixed vs variable mortgage rates
One of the biggest decisions you'll need to make when you apply for a mortgage is whether you want a fixed or variable mortgage rate. Fixed rates are set at the beginning of your term and remain steady for the entire term length, while variable rates will fluctuate alongside your lender's prime rate.
While a fixed mortgage rate lets you lock in a rate for a longer period of time, it means you won't benefit if your lender's prime rate drops. A longer term (like a 7-year term) also delays your renewal date, which is when you can renegotiate your mortgage if your financial circumstances improve.
Something else to consider is that historically, variable rates have tended to be cheaper for borrowers over the long term. Essentially, fixed rates see you trade flexibility and potential savings for certainty in your monthly payments. That's often a trade that's worth making, but you'll need to make that decision for yourself.
The bottom line
7-year fixed-rate mortgages are just one of the many options you have when you're looking to buy a home, so it's great that you've spent the time here learning a bit about them. If you're still a little confused as to which mortgage product is right for you, one of the best things you can do is to get in touch with a licensed mortgage broker for advice. Mortgage brokers don't charge consultation fees, as they're paid on commission. They can also help you get a better mortgage rate if you do decide to go ahead with a purchase.
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