3-Year vs 5-Year Mortgage in Today’s Market: Which Is Right for You?

By Dave Oliver, Mortgage Broker in Saskatoon

Choosing the right mortgage term is just as important as choosing the right interest rate. One of the most common decisions Saskatchewan borrowers face today is whether to choose a 3-year mortgage or a 5-year mortgage.

In a market that has shifted from rapid rate increases to cautious stability, this choice can have a major impact on your payments, flexibility, and long-term costs.

In this guide, we’ll break down the key differences between 3-year and 5-year mortgage terms, explain what’s happening in today’s market, and help Saskatoon buyers and homeowners decide which option makes the most sense.

Understanding Mortgage Terms (Not Just Rates)

A mortgage term is the length of time your interest rate, payment, and conditions are locked in. Common terms in Canada include 1-year, 3-year, and 5-year options.

While many borrowers default to a 5-year term, shorter terms like 3 years have become increasingly popular, especially in uncertain rate environments.

The “best” term depends on:

• Your timeline

• Your tolerance for risk

• Your plans to move, refinance, or break the mortgage

• How you expect rates to change

What’s Happening in Today’s Mortgage Market?

Mortgage rates have stabilized compared to the volatility seen in recent years, but uncertainty still exists.

Key market characteristics right now:

• Rates are no longer rising rapidly

• Major lenders are competing more aggressively

• Some borrowers expect future rate cuts, but timing is uncertain

• Flexibility has become more valuable than locking in long terms

Because of this, many Saskatchewan borrowers are reassessing whether a long 5-year commitment still makes sense.

What Is a 5-Year Mortgage?

A 5-year mortgage locks in your rate and terms for five years. This has traditionally been the most popular option in Canada.

Advantages of a 5-Year Mortgage

• Payment stability and predictability

• Protection if rates rise

• Less frequent renewals

• Peace of mind for long-term planners

Disadvantages of a 5-Year Mortgage

• Less flexibility if your situation changes

• Potentially higher penalties if you break the mortgage early

• You may miss out on future rate drops

5-year terms are best suited for borrowers who expect to stay in their home long-term and value certainty above all else.

What Is a 3-Year Mortgage?

A 3-year mortgage locks in your rate for a shorter period, giving you the opportunity to reassess sooner.

Advantages of a 3-Year Mortgage

• Greater flexibility

• Lower long-term commitment

• Earlier opportunity to renegotiate if rates improve

• Often lower penalties compared to longer fixed terms

Disadvantages of a 3-Year Mortgage

• Exposure to renewal risk sooner

• Potential for higher payments at renewal if rates rise

• Slightly higher rates than 5-year terms in some cases

In today’s environment, many Saskatchewan borrowers are choosing 3-year terms as a balanced middle ground.

3-Year vs 5-Year: Key Differences at a Glance

Which Option Is Better in Today’s Market?

There is no universal answer — but there are patterns.

A 3-Year Mortgage May Be Better If:

• You expect rates to decline over the next few years

• You may sell or refinance before five years

• You value flexibility

• You’re comfortable reassessing your mortgage sooner

A 5-Year Mortgage May Be Better If:

• You need predictable payments

• You plan to stay in your home long-term

• You prefer stability over flexibility

• Your budget cannot handle potential increases at renewal

What About Mortgage Penalties?

Penalties are often overlooked — but they matter.

• Fixed 5-year mortgages often carry higher penalties if broken early

• 3-year terms typically reduce long-term penalty exposure

• Life changes (job changes, family needs, refinancing) happen more often than expected

This is one reason mortgage brokers increasingly discuss term length as a risk-management decision, not just a rate decision.