---
title: Short-term mortgage vs. longer-term mortgage - which one?
description: How to calculate the difference between short and longer term mortgages in Canada.
---

[Richards Mortgage Group Blog ](https://www.richardsmortgagegroup.ca/blog)

# [Short-term mortgage vs. longer-term mortgage - which one?](https://www.richardsmortgagegroup.ca/blog/bid/185375/Short-term-mortgage-vs-longer-term-mortgage-which-one)

 Written by [Chris Richards](https://www.richardsmortgagegroup.ca/blog/author/chris-richards) | Aug 17, 2014 6:16:00 PM

A common question I hear from mortgage clients is how to decide between a shorter term mortgage and a longer term mortgage.  Here's a response to one of my recent mortgage customers.

Regarding term, take a term today based on your expectation of available rates at renewal time. This is called your "renewal risk."  For example, at the time of writing...

- An ultra competitive 2 year rate today is 2.34%* ... question to ask is what will the rate be on a 3 year term at renewal for an apples-to-apples comparison with a 5-year fixed rate at 2.94%.  The break even point is 3.29%, so you'd be better off today with a 5 year rate if you have to renew in 2 years at a rate higher than 3.29% 
- An ultra-competitive 3 year rate today is 2.59%*,  so you would need to renew for 2 years at 3.53% or less to make the 3 year term worthwhile.  (PS - I use a fancy spreadsheet to do the math!)
- Keep in mind, no one really knows where interest rates might be. Personally, I just took a 2.94% for 5 years myself.  Set and forget...I know what my payment is for next 5 years, and I see it as a coin toss.
- Alternately, if you want to play the short game and fret about the market, you can take a [variable rate mortgage](https://www.richardsmortgagegroup.ca/articles/mortgage-glossary/) for now and lock-in a fixed rate if you start to get concerned. A 5-year variable rate today might be Prime (mortgage) Rate less 0.50%, so 2.50%, maybe you can get it for a touch less. (* note: some first time borrowers get confused or focused on rate when the REAL GOAL is to get approved by a lender. Ultra-competive rate might not be offered for your employment and/or credit profile.)
- In today's market, I feel 10 year terms are generally noncompetitive (4.29% at present), paying far more today for the "potential" that rates might rise a lot.  Doing the 10 years at 4.29 vs 5 years at 2.94 math, your break even is 6.01% for renewal, meaning a 10 year contract would only make sense if you felt 5-year fixed rates would rise above 6% by renewal time.

So that is how to do the analysis. If you need help, please [contact me](https://www.richardsmortgagegroup.ca/contact/).

FYI, one thing in today's market (2014) is the old "rules of thumb" about short vs long term don't necessarily hold true.  Rates have never been this low *ever*.  This is a function of the aftermath of a world financial crisis. "Normal" mortgage rates have always been in the 4.5% to 6.5% range. Today, to qualify for a term under 5 years or a variable rate mortgage, the Government of Canada sets a benchmark qualifying rate, currently at 4.79%, meaning you have to be able to afford the mortgage if rates rise to this level - a stress test so to speak.

[Feel free to contact me for more info.](https://www.richardsmortgagegroup.ca/contact/)

[View full post](https://www.richardsmortgagegroup.ca/blog/bid/185375/Short-term-mortgage-vs-longer-term-mortgage-which-one)

```json
{
  "@context" : "http://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "Chris Richards"
  },
  "dateModified" : "2014-12-18T17:43:17.005Z",
  "datePublished" : "2014-08-17T18:16:00Z",
  "headline" : "Short-term mortgage vs. longer-term mortgage - which one?",
  "image" : {
    "@type" : "ImageObject",
    "height" : 250,
    "url" : "http://cdn2.hubspot.net/hub/115190/file-2240370413-png/RMG-img/Blog/Short-term-mortgage-vs-longer-term-mortgage.png",
    "width" : 1000
  },
  "mainEntityOfPage" : "https://www.richardsmortgagegroup.ca/blog/bid/185375/Short-term-mortgage-vs-longer-term-mortgage-which-one",
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "height" : 60.0,
      "url" : "https://www.richardsmortgagegroup.ca/hubfs/file-2071180059-1.png",
      "width" : 106.66667
    },
    "name" : "Articles"
  }
}
```