In Canada, a 7-year fixed mortgage gives you a long-term commitment without the hassle of renegotiating your mortgage every few years. Your mortgage interest rate and mortgage payment amount are fixed for the entire seven years. In other words, you can be sure how much money you’ll need to pay, making it easier to budget for and giving you stability. As your rate is locked in with a fixed mortgage, you won’t have to worry about rising interest rates either.

The most common mortgage term in Canada is 5-years, with 2-year fixed and 3-year fixed terms also being popular. However, there are some reasons why mortgage borrowers might look for a mortgage with a longer term. This page will take a look at the benefits of a 7-year fixed mortgage compared to shorter mortgage terms.

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Why choose a 7-year fixed mortgage over a shorter term?

First, you can enjoy greater financial stability since your interest rate and monthly payment will remain the same throughout the entire 7-year term. This allows you to budget more accurately and gives you peace of mind knowing that your mortgage payments won't increase. Borrowers with a variable or adjustable-rate mortgage would have had more to worry about as they saw interest rates rise significantly throughout 2022.

Another benefit is that there’s less hassle with renewing or negotiating when your term is over. While lenders might make it easy to renew, a shorter mortgage term means that you’ll need to keep a closer eye on current mortgage rates, deal with more paperwork, and potentially need to switch lenders. With a 7-year mortgage, you’ll have plenty of time before the term is up to start looking for a better rate or deal if necessary.

There are also reasons why a 7-year mortgage might not be the best choice for a borrower.

Usually, you might find that 7-year and 10-year mortgages have a higher interest rate than 5-year mortgages or those with shorter-terms. You’re paying a premium in order to lock-in your rate for an extended period of time. This means that the total cost of a 7-year mortgage could be higher than if you chose a 5-year mortgage.

Additionally, by locking in your rate for seven years, you’re agreeing to stay at the same interest rate for the entire seven years. This means that if mortgage rates fall during those seven years, you could be missing out on potential savings. Refinancing or renewing your mortgage early to get away from your 7-year fixed rate could come with mortgage prepayment penalties.

Short-Term vs. Long-Term Mortgages