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3-year fixed rate mortgages in Canada: What you need to know.

A 3-year fixed-rate mortgage is a great option for Canadians who want the stability of a fixed rate for a short period of time and the flexibility of being able to renew their mortgage sooner than the more common five-year term.

If you’re ready to compare 3-year fixed mortgage rates right now, choose one of the options above. If you’re renewing, refinancing, or are a first-time homebuyer in need of a new mortgage, LowestRates.ca can help you find the lowest rate on a three-year fixed mortgage.

Because we compare mortgage rates from the country’s top banks, brokers, and lenders, and we update those rates throughout the day, you’ll always see the most current 3-year fixed mortgage rates.

Your questions about 3-year fixed-rate mortgages, answered.

What is a 3-year fixed rate mortgage?

The first thing you should understand about a mortgage is the term. This is the length of time your mortgage contract and interest rate will be in effect. A 3-year fixed-rate mortgage is a mortgage that has a term of three years.

But remember — just because you have a 3-year fixed mortgage doesn’t mean you pay off your mortgage in three years. You’ll likely need many terms to pay off your mortgage. The total time that it takes to pay off your mortgage loan is called the amortization period. When your term comes to an end, you’ll have the option to renew the contract or renegotiate it, which may impact the length of your amortization period.

The second thing to understand about a mortgage is the type of interest rate you’re paying on it. That can be either fixed, where your interest rate remains the same for the term of your mortgage, or variable, where your interest rate fluctuates based on the behaviour of the Bank of Canada.

With a 3-year fixed mortgage rate, you’ll be charged the same interest rate for three years, no matter what happens in the markets. Keep in mind that fixed mortgage rates tend to be higher than variable mortgage rates.

When you sign a three-year fixed-rate mortgage, you enter a contract that’s valid for three years and you will have equal payments be put towards your interest and loan in the same capacity for the duration of your mortgage term.

Other helpful terms to know when it comes to 3-year fixed mortgages:

  • Closed mortgages. These are mortgages that have limits on the amount of extra money you can pay on top of your monthly mortgage payment. Interest rates on closed mortgages tend to be lower than on open mortgages (see below). Lenders depend on the stream of revenue you provide with your mortgage loan; paying it off sooner than scheduled can affect their finances. In Canada, a 3-year fixed-rate closed mortgage means you’re locked into the mortgage for three years, your monthly payments don’t change, and you will likely not be able to make any other payments on top of that. Finding the best 3-year fixed rate mortgage with no fees payable is often difficult because of the costs incurred if you choose to break your mortgage.
  • Open mortgages. These types of mortgages allow you to make larger monthly mortgage payments without being penalized for it. Open mortgages present the opportunity to pay off your mortgage sooner and as such, lenders usually charge more interest on them. A 3-year fixed-rate open mortgage in Canada means you would be locked into the mortgage contract for three years and you do have the ability to make additional payments towards your mortgage loan.

When you run a comparison on 3-year fixed mortgage rates on LowestRates.ca, you can specify whether you’d like to see rates for an open or closed mortgage. See what the major Canadian banks and leading mortgage brokerages offer on 3-year fixed mortgages by comparing rates today.

What is the average interest rate on a 3-year fixed rate mortgage in Canada?

In order to answer that question, we have to look at the past behaviour of fixed mortgage rates.

On LowestRates.ca, we track historical 3-year fixed mortgage rates in Canada. Below is a chart that illustrates the average mortgage rates on our site compared to the Bank of Canada’s benchmark rate.

To find today’s rates on 3-year fixed-rate mortgages, click the pink button at the top of the page. We update these rates daily.

What fees are associated with a 3-year fixed rate mortgage?

Are you after the cheapest 3-year fixed rate mortgage with no fees? Unfortunately, a 3-year fixed rate mortgage with no fees doesn’t exist. All mortgages come with fees, and we’ve outlined many of them below:

  • Mortgage broker fees: If you secure your mortgage through a broker, you’ll be responsible for paying them a finder’s fee. If you are a subprime borrower (meaning you have a low credit score or need a high ratio mortgage), you may be asked to pay another fee upfront, which protects the broker in case you end up not qualifying for a mortgage.
  • Default Mortgage Insurance: In Canada, if your down payment is less than 20% of the home’s sale value, you need to purchase mortgage insurance from the Canadian Mortgage Housing Corporation. Mortgage insurance premiums are folded into your monthly mortgage payments and are intended to protect your lender in case you default on your mortgage.
  • Provincial Sales Tax (PST): In some provinces, a Provincial Sales Tax (PST) is tacked on to your mortgage balance and has to be paid when you close on the home.
  • Interest adjustment costs: This fee can come into play if you close on a house in the middle of a month. If that happens, your lender may charge you for the interest accrued before you actually pay your first full mortgage payment.
  • Appraisal fee: Part of the mortgage approval and homebuying process includes an independent appraisal of your home, to see if it meets your lender’s lending criteria. This cost falls to you. This is one reason why even the best 3-year fixed rate mortgages won’t come with no fees payable.
  • Prepayment penalty: If you have a closed mortgage, you’ll be charged a fee if you make extra payments. If you plan to make more payments than just the monthly one, or if you plan to make a larger payment that what’s required each month, you should opt for an open mortgage instead of a closed mortgage.

As we stated above, there’s no such thing as a 3-year fixed rate mortgage with no fees. It’s best to estimate these fees ahead of time so you’re not taken off guard when payment comes due. These are fees associated with the mortgage itself; there are several others associated with the homebuying process in general, including legal costs, property taxes, and land transfer taxes.

The good news? We can help you find the lowest 3 year fixed mortgage rates. All you have to do is use the LowestRates.ca mortgage quoter to find the best 3-year fixed mortgage rates in Canada.

Should I use a mortgage broker or a bank?

You can secure the best rates on a 3-year fixed mortgage with a broker, or with a bank. Which one you choose is up to you.

If you go with a mortgage broker, chances are you’ll benefit from better rates than you would with a bank. That’s because brokers have access to a wide range of lenders, giving you more options. There are other plusses, too, including that brokers don’t have an allegiance to any particular lender, so you can feel confident that they’re trying to secure the best rate.

That said, there’s a chance you might not get access to every single lender out there, since some lenders don’t work with brokers.

What is the difference between a 2-year vs 3-year fixed rate mortgage?

  • 2-year mortgage rates will be lower than 3-year mortgage rates.
  • Your mortgage contract will end after 2 years.

What is the difference between a 3- or 5-year fixed rate mortgage?

  • 3-year mortgage rates will be lower than 5-year mortgage rates — but higher than 2-year mortgage rates.
  • Your mortgage contract will end after 3 years.

Where can I get the cheapest rate on a 3-year fixed rate mortgage in Canada?

While we can’t recommend one Canadian bank over the other for their 3-year fixed rate mortgage deals, we can give you some advice on how to look more attractive to potential lenders. To secure the best 3-year fixed rate mortgage offer, make sure:

  • Your Total Debt Service and Gross Debt Service ratios are 32% and 40% or under, respectively.
  • You can pass the mortgage stress test.
  • You have a high credit score.
  • You have a decent down payment, and you can prove it’s not borrowed.
  • You have a steady income.

If you check these boxes, you’ll have more options when it comes to mortgages. If you only check some of these boxes, you may still get a mortgage but it will likely be from a B lender, which offers slightly higher interest rates.

Compare rates now to find the best 3-year fixed mortgage rates in Canada that suit your needs.

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