3-year vs 5-year
mortgage term —
which should you choose?
A 5-year fixed gives certainty for half a decade. A 3-year fixed costs less per year but forces you to renew sooner — better if you expect rates to fall or plan to move in 3–4 years.
What changes with
a shorter term?
Term length is not your amortization — it only changes how often you revisit your rate. Everything else flows from that.
How long you're committed
A 3-year term locks your rate for 36 months; a 5-year for 60. Longer means fewer renewals, but more time tied to today's rate.
Your exposure if rates move
If rates fall, a 3-year lets you renew lower sooner. If rates rise, a 5-year protects you longer.
Cost to exit early
A shorter term means less time when a big IRD penalty can apply. That matters if you might move.
How often you re-shop
Over 25 years that's about 8 terms on 3-year terms vs 5 on 5-year terms. More renewals are more chances to save, if you shop.
How do I choose
my mortgage term?
Rate first. Rate cycle second.
Your situation third.
Understand your situation
How long will you keep this mortgage? Could you move or refinance in the next few years?
Compare on the factors that matter
Rate is only one part. We compare penalty risk, renewals and the rate outlook side by side.
Get pre-approved for the right product
We shop both terms across 100+ lenders. One credit check, no fee to you.
Which term is right
for you?
Tap any situation below to see which term we'd recommend and why.
If you’re… · Pick: 3-yearRates are high and expected to fall
Rates are high and expected to fall
Renew into lower rates two years sooner instead of locking today's rate for five years.
Start Pre-ApprovalIf you’re… · Pick: 5-yearYou're settled and want zero hassle
You're settled and want zero hassle
Lock a well-shopped rate, skip extra renewals and forget about it. Most certainty, least hassle.
Lock my 5-year rateIf you’re… · Pick: 3-yearYou might move or refinance in ~3 years
You might move or refinance in ~3 years
You reach a penalty-free renewal sooner, with less time for a big break penalty.
Model my term optionsIf you’re… · Pick: 5-yearRates are low and might rise
Rates are low and might rise
Lock the low rate for longer. When rates may climb, longer protection is worth more.
Lock my rate nowHow do 3-year and 5-year
terms compare?
No single column wins. The right term depends on the rate environment and your timeline.
- ✓You expect rates to drop and want to renew into them sooner
- ✓You might move, refinance, or restructure within a few years
- ✓You want to limit how long you're locked to today's rate
- ✓You're bridging a temporary situation (B-lender, rebuilding credit)
- ✓You want maximum certainty and minimal renewals
- ✓You're comfortable with today's rate for the longer haul
- ✓You're settled and plan to keep the mortgage
- ✓You'd rather not re-shop the market every few years
| Factor | 3-Year Term | 5-Year Term |
|---|---|---|
| Commitment length | 3 years | 5 years |
| Renewals over 10 yrs | More frequent (~3 times) | Fewer (~2 times) |
| Rate | Sometimes higher than 5-year | Often the most competitively priced |
| Exposure if rates fall | Lower — renew sooner into lower rates | Higher — locked longer at today's rate |
| Exposure if rates rise | Higher — renew sooner into higher rates | Lower — protected longer |
| Break penalty risk | Shorter window, often smaller IRD | Longer window where a large IRD can apply |
| Best when you'll | Move/refinance soon, or expect cuts | Stay put and want certainty |
| Maintenance | Re-shop more often | Set and forget |
Common questions,
clear answers.
Term length, rates, penalties, and renewal — answered plainly.
Is a 3-year or 5-year mortgage better in Canada?
Neither is better for everyone. A 5-year fixed gives certainty for half a decade. A 3-year fixed costs less per year but forces you to renew sooner — better if you expect rates to fall or plan to move in 3–4 years. Match the term to how long you'll keep the mortgage.
Does a shorter mortgage term mean a higher rate?
Sometimes. Lenders compete most aggressively on 5-year terms, so 3-year rates can be a touch higher — but not always; in some markets shorter terms are priced competitively or even lower. The rate difference is only part of the decision. The bigger factors are the rate outlook and how soon you might want out of the term.
Does choosing 3 vs 5 years change how fast I pay off my mortgage?
No. The term is just how long your rate is locked; your amortization (typically 25 or 30 years) is what determines payoff speed. At the end of each term you renew the remaining balance. Choosing a 3-year vs a 5-year term changes how often you revisit your rate, not how quickly you become mortgage-free.
What happens at the end of a 3-year term?
You renew the remaining balance at the rates available then, with no penalty. Staying with your lender doesn't require requalifying; a federally regulated lender must send your renewal statement at least 21 days before the term ends (FCAC). It's also your best chance to save by shopping the whole market: a straight switch to a new lender (same balance and amortization) is exempt from the stress test (OSFI), though the new lender still reviews your income and credit. A shorter term simply means you reach these renewal decision points more often, which is an advantage if rates are falling and a risk if they're rising.
Should I consider a variable rate instead of a shorter term?
It's worth comparing. A variable rate moves with prime and usually lets you lock into a fixed term at any time, while a shorter fixed term gives you locked certainty with an earlier exit. They're different ways to stay flexible. A broker can model a 3-year fixed, a 5-year fixed, and a 5-year variable against your situation so you can see the trade-offs in dollars before deciding.
We’ll try to beat your rate.
If we can’t, we pay you $500.¹
¹ Rate Beat: eligible Big-6 bank written offers only · same product, term & amount · $500 paid to you or your nominated charity at closing · conditions apply
Find a mortgage specialist in your city
The 3-year vs 5-year decision is driven by the national rate environment, but your local market — prices, competition, and lender mix — shapes which products are most aggressively priced. A local specialist brings both.