If you’re mortgage shopping in Greater Toronto, Ottawa, Kingston, Pembroke or North Bay, and your mortgage is over $200,000, have a look at a 3-year term.
Most brokers now have access to 2.90% on a 3-year fixed, which is near the lowest rate ever for this term. This promotion includes all the normal bells and whistles: 20% prepayment options, double-up payment privileges, portability, a 120-day rate hold, etc.
Despite the great rate, a lot of people shy away from three-year terms, preferring instead the security of a five-year mortgage. At 2.90%, however, you have lots of breathing room.
Amortization analysis suggests that interest rates could rise by 3% and most people may still be better off by choosing a 2.90% three-year term. This assumes:
- Successive 3-year terms (i.e., your first mortgage would be at 2.90% and you’d renew at 5.90% in three years)
- A 5-year (60-month) comparison period.
- Comparison against fully-discounted and fully-featured 1, 2, 4- and 5-year fixed terms, as well as 3- and 5-year variables.
- A 3% linear rate increase over five years, beginning in June 2010, and going up every three months thereafter. (This isn’t a prediction, just an assumption for analysis purposes.)
Other things to note:
Pre-approvals are not permitted on this promotion. Clean credit and a 620-650 minimum credit score are required. As always, please consult a licensed mortgage planner for details and to confirm suitability.
Last modified: April 28, 2014
Are these for new mortgages only? At this rate it may be worth breaking my 5Y (3.5Y left) / 5% mortgage
Hi Mitch, It’s for either a purchase or refinance. Cheers, – Rob
Is the lender reputable?
What lender is offering?
Hi Trevor, Yes, they are. When it comes to non-public rate promotions we don’t post lender names on the site, but feel free to shoot me (or any GTA/Ottawa broker) an email for all the details. Cheers, – Rob
With only $30G left on our mortgage, we were going to pay the balance with our HELOC when it matures in Nov. Our LOC is current 2% lower than the mortgage rate. But, today we got a notice they were going to double our interest rate in October. Should use the HELOC, or lock into a short term mortgage?
Hi Rob,
Is there any wiggleroom/flexibility if the mortgages are slightly less than 200K – ie 175-180..
Thanks
Dan
Hi Dan, Unfortunately they’re pretty sticky on the $200k. Their rate for $60k to $199k mortgages is 3.09%. Sorry! – Rob
Hi Sarah, What is the rate they’re quoting you on the HELOC and how long do you feel it would take you to pay off $30,000? Rob
Rob,
In the case of Dan with $175k mortgage, can’t he borrow $200k to get the rate, and then make a lump-sum payment of $25 the first week ?
After all the mortgage allows 20% prepayment.
That probably would not work for a purchase or if equity was insufficient.
I’ve heard that a 10-year fixed mortgage is the best at this point as rates are only destined to go up… Wouldn’t you want to lock in at the low rate for a long time even if the premium is slightly higher? Has anyone done the math on this?
2.9% for three years sounds great. Although I see that an online broker now has a one year rate posted for 2.09%. Seems hard to pass up if you’re expecting to switch to a variable in the hope that we’ll be at or below prime sometime soon.
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I’d take the 3yr over the 1yr. If rates rise a few percent starting next year you’ll be better off with the longer fixed rate.
I definitely would avoid a 10yr. Why would you want to pay so much for a 10yr when you can get 5yr’s under 4%?? You think rate are really going to go up that much (and stay up for 10 years)??
Hi Rob,
Our HELOC will go from 2.25% to 5.87% in Oct, although I’ll be calling the bank and getting them to lower it or switch to PC Financial or similar. We could pay off $30G in 2-3 years. I could roll the mortgage and the non-business LOCs together into a new 3 year mortgage…
We have only 1 credit rating @ 6.20 + as mine is struggling. Would this possibly qualify for
this rate ?
What lender is this with?
Read the comment above by Canadian Mortgage Trends.
I’m proud to say I got a 3-year last week from RBC at 2.80% :-)