Mortgage term length: should you pick 1, 3, 5, or 10 years in Canada?
The term is how long the rate is locked. The amortization is how long it takes to pay off the loan. Most Canadians sign a 5-year term against a 25- or 30-year amortization and renew every five years until paid off. But the 5-year default is a habit, not a law.
The honest framework
Match term length to the rate cycle, not to the calendar.
- Pick a shorter term (1–3 years) when rates are elevated and you expect the central bank to cut. You take a slightly higher posted rate today in exchange for the option to renew into materially cheaper money in 24–36 months. Locking 5 years at a peak is how households end up watching neighbours refinance lower while they sit on a penalty.
- Pick 5 years when rates are flat or low and you want certainty. This is the default for a reason — the spread between 3-year and 5-year is usually small, and one fewer renewal cycle means one fewer chance to be caught at a bad time.
- Pick 10 years almost never. The 10-year rate carries a meaningful premium over 5-year, and after 5 years you can break a 10-year fixed for only 3 months’ interest under the federal Interest Act. So in practice it’s a 5-year term with worse pricing — only worth it if you genuinely cannot tolerate any rate uncertainty for a decade.
When 1- or 2-year terms make sense
Shorter than three is a tactical bet. Useful when:
- You expect to sell or move within the term and don’t want to deal with porting or breaking. The penalty math gets ugly fast on a fixed mortgage you don’t intend to keep.
- You think the next 12 months will see meaningful cuts and you want to renew into them. Compare the savings of waiting against the higher rate you’d pay for a 1-year vs a 3-year today — the 3-year is often cheaper for a marginal sacrifice in flexibility.
- You’re in a transition — divorce, between jobs, planning to convert a property — where committing to five years would be premature.
What about variable?
Variable-rate mortgages are a separate decision from term length, though they’re usually offered at 5-year terms. See our fixed vs variable guide for the trade-off; you can run the math against any term length there.
Default recommendation
If you’re a typical Canadian buyer in a normal rate environment with no near-term plans to move, take the 5-year. If rates are demonstrably above their cycle average and the curve is inverted (3-year priced lower than 5-year), take the 3-year and plan to renew into the cycle’s lower half. The 10-year almost never wins on math.