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8-year fixed-rate mortgages in Canada: what you need to know.

An 8-year fixed-rate mortgage is one option for Canadian home buyers who want to lock in interest rates for longer than the standard 5-year mortgage term, or if you want a slightly longer time frame for paying off your mortgage (mortgage terms run up to 10 years).

A mortgage with an 8-year term is less common as a financial product. The most popular mortgage terms in Canada are 3- and 5-year terms. As a result, these are the mortgage terms LowestRates.ca compares in our digital marketplace. However, we can connect you to a broker who can find 8-year fixed rate mortgage deals from the top lenders in Canada, including the country’s largest banks.

Whether you’re a first-time homebuyer shopping for a new mortgage or you want to refinance or renew an existing mortgage, LowestRates.ca can help you find the fixed rate term that’s best for you. We compare rates from the country’s leading lenders and brokers, and update them throughout the day. Choose one of the options above (buying, renewing or refinancing) and click “Get Started” to see available terms and rates.

Your questions about 8-year fixed-rate mortgages, answered.

What is an 8-year fixed-rate mortgage?

There are several important parts to this question, so let’s look at each one at a time to fully understand the financial landscape for current 8-year fixed mortgage rates.

Mortgage term

The mortgage term describes the length of the mortgage contract — in this case, eight years. The contract spells out how long you’ve agreed to work with a specific lender, how your interest rate will be set during that period, and any other conditions you’ve agreed to abide by during that time.

After the eight-year mortgage term is up, you can renew your contract with the same lender or switch to a different lender. The conditions of the contract can change at this time, including how your interest rate is set and other rules you have to follow.

Fixed vs. variable rates

Along with choosing your preferred mortgage term, another important decision you’ll need to make is the type of interest rate. There are two options: a fixed rate or variable rate.

Variable rates may be adjusted by your lender throughout the mortgage term based on market conditions. Variable interest rates are often lower compared to fixed rates, but there is more risk built in. If you opt for a variable rate mortgage and interest rates drop during your mortgage term, your mortgage interest rate will drop too. However, if interest rates climb during your mortgage term, your mortgage rates will go up as well. This could make your mortgage unaffordable if you don’t have room in your budget for higher payments.

The majority of Canadian home buyers choose the stability of a fixed-rate mortgage. A fixed rate offers a stable interest rate throughout the mortgage term. If you choose an 8-year fixed rate mortgage today, you know the interest rate you’re getting for the full eight years of the contract. There won’t be any surprises.

On the other hand, that greater security comes at a cost. Fixed mortgage rates are typically higher than variable mortgage rates, and that includes historical 8-year fixed mortgage rates in Canada. Like an insurance policy, you pay a little more to have less risk with a fixed rate vs. a variable rate.

Open vs. closed mortgages

When considering what mortgage term is right for you, another important factor to consider is whether the eight-year fixed mortgage is “open” or “closed.”

An open mortgage allows you to prepay, renew or refinance without penalties. This is a great option if you know you want to move to a new house, pay off your mortgage or refinance before the eight-year mortgage term is up. Because open mortgages make it easier for you to pay off your loan faster, lenders typically charge higher interest rates for 8-year fixed open mortgage rates in Canada. Still, this can be worth it to avoid significant penalty fees if you want to make additional payments or pay off your mortgage early.

Closed mortgages are more common than open mortgages, because most homebuyers don’t plan to pay more than their standard mortgage payments each month. With a closed mortgage, you’re locked into a payment schedule and can’t make extra payments, pay off your loan early or refinance without incurring fees. In exchange for sticking to a rigid payment schedule, lenders will typically offer lower interest rates for an 8-year fixed closed mortgage in Canada compared to an open mortgage.

Finding the best 8-year fixed rate mortgage offers

Both the fixed interest rate and the longer-than-average mortgage term may appeal to a homebuyer who prizes stability and security in a loan product.

LowestRates.ca lets you compare mortgage products with the features you need, or search for the best rates among different mortgage types.

What are the fees involved with an 8-year fixed-rate mortgage?

Are you seeking the cheapest 8-year fixed-rate mortgage with no fees? Unfortunately, an 8-year fixed-rate mortgage with no fees just doesn’t exist. Whatever type of mortgage you choose, fees are one feature they all have in common.

The amounts and types of fees can vary, so knowing about them and comparing them across lenders and mortgage products can help you save money.

Most of the fees associated with your mortgage will be part of the closing costs. Closing costs are all the expenses related to finalizing your home purchase. You should expect to spend about 1.5% to 4% of the home’s purchase price on the closing costs.

Closing costs typically include:

Mortgage insurance: In Canada, homebuyers who make a down payment less than 20% of the home’s purchase price are required to buy mortgage default insurance from the government’s Canada Mortgage and Housing Corporation (CHMC), or private insurance companies Canada Guaranty or Sagen. Mortgage insurance protects the lender in case you can’t pay for your mortgage in the future. The premiums are typically added to your monthly mortgage payments, but also can be paid upfront as a lump sum.

Provincial sales tax (PST): Ontario, Quebec and Saskatchewan charge sales tax on your mortgage default insurance premiums, which you have to pay when you close the deal on the home.

Interest adjustment costs: If you close on a home in the middle of a month, your lender may charge you this fee to cover the interest that accrues before your first mortgage payment is due, which is usually at the beginning of the next month.

Appraisal fee: Your lender will require an appraisal of the home as part of the mortgage approval process. The prospective homebuyer is typically responsible for this expense.

In addition to these fees related to your mortgage loan, there are usually other costs when you close on a home purchase, including property taxes, legal fees and land transfer taxes.

Prepayment penalties

After closing the deal on your new home, there can also be other fees specific to your mortgage contract. Be sure to read the fine print so you know what they are. The most common mortgage fee borrowers encounter after closing are prepayment penalties.

If you have a closed mortgage, you can be hit with prepayment penalties for making accelerated payments above the monthly minimum. Prepayment penalties can be large, potentially canceling out any savings on interest you might gain from paying off your mortgage early. Lenders vary in their prepayment terms. Some closed mortgage contracts may allow you to make limited additional payments without a penalty, up to a certain amount per year.

If you’re looking for the best 8-year fixed rate mortgage in Canada with no fees payable, that’s unfortunately not realistic. However, the good news is that you now know what fees to expect and ask questions about as you shop for the right mortgage product.

Even better, LowestRates.ca can help you make sure you get the best mortgage deals by finding today’s best interest rates. Just use the mortgage quoter at the top of the page.

Where can I get the cheapest rate on an 8-year fixed-rate mortgage in Canada?

No single lender is going to offer the best rates for every borrower or home purchase. However, the more attractive you are as a borrower, the more likely you are to get the lowest eight-year fixed mortgage rates available from any lender.

Banks favor borrowers who:

  • Have a total debt service ratio of 44% or less, and a gross debt service ratio of 39% or less
  • Can pass the mortgage stress test
  • Have a high credit score
  • Have a significant amount set aside for the down payment
  • Have reliable income

If you meet all of these criteria, a wider group of mortgage lenders will want to work with you and they are likely to offer you better interest rates.

But as you can see, it’s impossible to answer the question, “What is the best 8-year fixed rate mortgage?” since the answer depends on the qualifications of the borrower.

Should I use a mortgage broker or a bank?

You may find the best 8-year fixed mortgage rate through a Canadian bank, or you might score the best deal by working with a broker. Shopping around will help you find the product that’s best for you. There are several other factors to consider along with interest rates in deciding whether to work with a broker or bank for your mortgage.

Brokers

Brokers can do a lot of the comparison shopping for you, since they work with multiple lenders and are familiar with the market. They can make the process simpler, but typically charge a finder’s fee for their services. However, they often also access special deals by working in high volume with lenders and can pass these savings onto the borrowers they work with. It’s possible that 8-year fixed mortgage broker rates will be lower than the rates you can get directly from a lender like a bank.

Banks

Some home buyers prefer to get a mortgage directly from a bank because they like the familiarity of a well-known brand name, or the comfort of an existing financial relationship. If you already do business with a bank, this can sometimes speed up the mortgage application process, since they already have access to some of your financial information. Banks can only offer their own financial products, so you’ll need to compare rates among different banks to get the best deal. Banks tend to have more stringent standards for borrowers, so if you are self-employed or face other challenges in getting approved, you may not qualify for a bank mortgage.

Finding the best mortgage product

Rather than choosing a bank or a broker from the outset, why not compare the best mortgage offerings from both? LowestRates.ca lets you compare quotes from 75+ banks and brokers in Canada to find the best mortgage for your needs.

What other mortgage terms are available?

The term is how long your mortgage contract lasts, and how long you’re locked into working with the same lender under the conditions you’ve agreed to, including your mortgage interest rate. In Canada, mortgage terms can range from six months to 10 years.

Rather than asking, “What is the lowest 8-year fixed rate-mortgage?” it may actually be in your best interest to consider which mortgage terms come with the best rates and other conditions to meet your financial needs.

Historically, shorter mortgage terms have come with lower interest rates. Five years is the most popular mortgage term among Canadian homebuyers and is considered standard. Eight-year mortgage terms are rare and only certain lenders offer these products. Possibly because of the rarity of these types of mortgage products, 8-year fixed mortgage rates can sometimes be higher than 10-year mortgage rates, which are more common.

Before you opt for an 8-year fixed-rate mortgage, run a comparison with 10-year fixed mortgages. If you’re seeking a longer mortgage term to help you lock in the affordability of today’s low-interest market, a 10-year mortgage may offer you the better deal. You’ll likely have more lenders and products to choose from, and potentially cheaper rates, too.

Still, an 8-year fixed-rate mortgage can have value if you know you want to renew or discharge your mortgage in exactly eight years. And an 8-year fixed mortgage can still be a smart choice over a shorter mortgage term in letting you freeze current favorable interest rates for a longer time. Longer mortgage terms are a good option for people who believe interest rates are likely to increase before their mortgage term is up.

To find the best mortgage product for your needs, use LowestRates.ca to start comparing rates now.

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