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What is a 7-year fixed rate?
The
term “7-year fixed rate” is made up of two parts: the length of time and
the type of mortgage.
The length of term is how long
you agree to a certain set of conditions for your mortgage, and the type of
mortgage dictates the interest rate you’ll pay. A fixed rate mortgage means
that the interest rate won’t change throughout the duration of the term (in
this case, seven years).
When the
term ends, your mortgage isn’t paid off. The end of a term means you’ll have to
get a new term, with new conditions and interest rates.
Who is a 7-year
fixed term best for?
There are a couple reasons to go for a 7-year fixed term:
1.
You want to lock in an interest rate for a
longer period of time
2.
The rates aren’t substantially higher than a
5-year fixed
3.
If you break a mortgage after 60 months (5
years) you can only be charged three months’ interest, not the interest rate
differential
However, there are a few downsides to this as well:
1.
If rates are going down, you have to wait longer
to get a new term
2.
They are more expensive than 5-year terms
How popular is a 7-year
fixed term?
In Canada, most homebuyers choose
a fixed rate mortgage. Mortgage terms between 2 – 4 years are the second most
popular option but are far behind 5-year
fixed terms. 2 – 4-year terms are the
most popular with homebuyers under the age of 55, at 23%. Those with a mortgage
over the age of 55 overwhelmingly choose a 5-yearmortgage
and are almost evenly split between a 2 – 4-year
term and a 6 – 10-year term.
Most people do not go for terms
longer than 5 years. In fact, for all the mortgage terms between 6 and 10
years, only 8% of Canadians choose them.
|
Mortgage
Type
|
Mortgage
Holders Under 55
|
Mortgage
Holders
Over 55
|
|
1 year
|
6%
|
6%
|
|
2 – 4
year
|
23%
|
12%
|
|
5 year
|
65%
|
69%
|
|
6 – 10
year
|
6%
|
10%
|
|
11+
year
|
0%
|
2%
|
With the fear of rising interest rates, many
home buyers and mortgage holders needing to renew will probably opt for a fixed
mortgage. 
