When you have a 3-year fixed rate mortgage this is a mortgage that has a fixed rate interest or interest that doesn’t change over the 3-year term.

The term is not the amortization period as this is the length which is required to pay off your mortgage.  A 3-year term is not as popular as other Canadian mortgage rates, but they can be ideal under certain circumstances.

A Comparison of 3-Year Fixed Mortgage Rates

There are several factors which support the choice for obtaining a 3-year year short-term mortgage. If you feel that there is a going to be an environment where the interest rate may fall or stay stagnant, the shorter 3-year term may be better for you. It’s possible to take advantage of the lower rates when it comes time to renew your mortgage. The 3-year fixed rate mortgage means that you’re not going to be locked into one rate for longer when compared to other mortgage types.

If you feel that you’re going to break the mortgage within a few years, a 3-year fixed term is going to be better for you than the more standard 5-year terms which more people tend to go for. The 3-year would save you a lot of money in penalty costs since you would be penalized for breaking the 5-year term early.

Some Features of the 3-Year Fixed Rate Term

There are various features of the 3-year fixed rate mortgage that you might not know about or understand fully. Here are the features that you need to be aware of.

  • The payment amount and the mortgage rate will stay the same for 3 years, so you can budget your money easily
  • The rate can be higher than the rate you may get with some shorter-term variable rates, so you usually pay a premium to keep your fixed rate
  • You may not be able to commit to the mortgage term if you feel you may move or have to sell within the time period
  • If you sell before the 3 years is up, there is a prepayment penalty
  • If you qualify for the 3-year fixed rate you must also qualify for the 5-year fixed rate which is usually the benchmark rate, and this can be higher

Before you decide upon the 3-year fixed rate you must also look at market pricing regarding premiums and different terms when you lock in the shorter-term mortgage rates. The main advantage to the fixed rate mortgage is that the monthly payments stay at a constant rate and you have protection against the fluctuations in interest rates. Variable rates are exposed to the changing prime lending rate but are often less expensive when you look at them historically.

The Popularity of the 3-Year Fixed Mortgage Rate

It’s estimated that around 20% of Canadians have between 2-4 year mortgage terms with the percentage being slightly higher for younger home buyers. Younger mortgage seekers tend to have more tolerance for risk and they are less likely to lock in for a longer term. The fixed-rate mortgage across all terms accounts for around 66% of all mortgages.


It’s important to understand mortgages, rates, and mortgage terms before you sign on the dotted line. The 3-year fixed rate term can have advantages and disadvantages so it’s up to you to talk to a professional about all your options before you make that final decision.