5 year fixed mortgage Red Deer

The Top Mortgage Product Is the Five Year Fixed Mortgage in Red Deer!

The five year fixed rate mortgage is the most popular mortgage in the Red Deer real estate market. Roughly 2/3rd of all mortgages have a five year term, while the rest have shorter or longer terms. Just under 10 percent of mortgage holders opt for a one year or lower term, while one in four choose a one to four year mortgage term.

And about two thirds of mortgage holders choose for a fixed rate mortgage. Most do so for the predictability, finding it reassuring to know their house payment won’t shoot up along with interest rates. They run the risk of paying more than they have to with a fixed rate mortgage. That’s why the five year renewal is so popular. It balances the stability of a five year term with the ability to adjust the loan terms up to five times over the typical 25 year home loan.

The variable interest rate mortgage is more popular with older borrowers than younger ones. The reasons for this could include their higher average income that allows them to weather higher interest rates or their expectation that interest rates will fall based on experience. Variable rates also tend to be cheaper to originate, since the lender has less risk of losing money unless you default altogether.

Factors That Determine Interest Rates

Canadian fixed rate mortgage rates are based on the five bond yields at the time the rate is issued. Click here to see current bonds https://ca.investing.com/rates-bonds/canada-5-year-bond-yield. This bond rate rises and falls with the state of the Canadian economy. Interest rates rise when inflation is high, unemployment is low and exports are booming. Interest rates fall when the economy slows down. Variable interest rates are based on the economy and the Bank of Canada when they determine if they will increase or decrease prime.  Variable interest rates can change during the term of the loan if prime moves up or down the fixed mortgage does not change during your term.

None of this takes lender fees into account. Lenders must pay for the administrative costs of issuing the loan and maintaining it. This is why their stated mortgage rate is always higher than the posted bond rates. They also charge fees to issue the loan, and they’ll charge you a fee in most cases to break the mortgage or refinance it. Yet you may save money if you refinance or switch lenders. Let us explain how banks and lenders calculate mortgage penalties if you pay out your mortgage early. Big banks use posted rates at the banks when calculating the interest rate differential which is how they determine your mortgage penalty if you break your mortgage mid-term or payout more than your allotted amount per year. Let us help you understand the differences so you are never caught with a big penalty. Call your Trusted Red Deer Mortgage Brokers at Whalen Mortgages Red Deer today to get more information. 

Mortgage Term versus Amortization Period

A 5 year fixed rate mortgage doesn’t mean you have a five year amortization period. The typical Red Deer mortgage has a 25 year amortization period. This means that it is paid off in 25 years. The home owner’s mortgage comes up for renewal at the end of the mortgage term. Most choose to renew their mortgage with the current lender. Unfortunately, this means they miss out on lower interest rates offered by other lenders. And they lose the opportunity to refinance or transfer their mortgage with better loan terms such as the lender which holds a lower prepayment penalties or the ability to make more payments against the loan balance without penalty. Understand that you have to meet various approval criteria to change the terms of your loan whether refinancing or renewing it. We are here to help you get this done and make it not stressful.