Choose a term around your plans, not only the rate

Look at the prepayment privileges, portability, and the penalty formula. A five-year term isn’t automatically safer, not if your situation could change within two years.

• When the next change is likely to hit
• What leaving before maturity would cost
• The flexibility you’ll use

You are torn between a five-year term at 4.7% and a three-year term at 4.9% on a $350,000 balance. The payment gap is about $40 a month, $1,440 over three years. You expect to sell in three years for a bigger house. If you sell at month 36 on the five-year term, the lender calculates a penalty on the 24 months left; on a rate differential, it can exceed $8,000 if rates have fallen. With the three-year term, the term ends at the sale: no penalty. The $1,440 “saved” by the lower rate bought an $8,000 risk.

If your horizon is genuinely long and stable, no sale, no large repayment, no refinancing planned, the long term at the lowest rate is the right choice, and this article only confirms your instinct. A portable agreement also changes the math: if you can carry the loan to the next house, a long term becomes possible again despite a move. Finally, in an open mortgage or a home equity line, the term question does not arise the same way, since early repayment carries no penalty.

The choice is not only between three and five years. A one- or two-year term has a precise use: when you know an event is coming, a sale, an inheritance, the end of a probation period that changes your income, or when you believe conditions will be better soon and you accept renewing more often. The price is a sometimes higher rate and a new negotiation at every maturity, with the paperwork that comes with it. Another option few people look at: splitting the mortgage into two portions with different terms, so the whole balance does not renew on the same day at the same rate. It is not offered everywhere and it complicates a future switch. In every case, the right term is chosen with a calendar in front of you: when does my life change? That date sets the length, not the rate table.

Read the renewal guide

FCAC — Mortgage types and terms. Reviewed August 12, 2026.