If you are renewing, buying or refinancing in 2023 then make sure to connect with your mortgage broker early so that you can start looking at options. The fixed rates are the lowest they have been in a long time (since the big hikes the past year) and there is a very large spread with fixed and variable.

Many of our clients are looking at short term rates as they have become very popular. Taking a longer-term rate may be tempting because the longer the term you lock into right now, the lower the rate. This means the 4- 5 year fixed rates are the lowest rates you can get now. The shorter-term rates which are 1-3 years are higher right now however they could be more beneficial for cost savings longer term. Variable and adjustable-rate mortgages are sitting at the highest point right now. Here are some reasons to consider a shorter-term mortgage right now:

There are several reasons to consider short-term mortgage rates in 2023:

  • Flexibility: Short-term mortgages typically have shorter terms, which can provide borrowers with more flexibility to refinance or sell their home without facing prepayment penalties.
  • Hedging Rates: Short-term mortgages can be a great way to hedge your long term interest rates. The overall mortgage rates are the highest we have seen in over a decade and going short term can allow you to get into a potentially lower rate in 2 to 3 years when rates start to come down. The commitment is less, and you can start shopping around early. Even though they are priced a bit higher, you can negotiate sooner.
  • Mortgage Penalties: If you decided you want to take advantage of a lower rate sooner or need to break the loan for other reasons, then the penalty to break will be much less than trying to break a 5 year fixed.
  • Rising home prices: If home prices are increasing rapidly, borrowers may be more willing to take on a short-term mortgage in order to enter the market sooner, with the goal of refinancing or selling once the value of their home has appreciated.
  • Mortgage Strategies and Personal Financial Goals: Borrowers may have personal financial goals, such as paying off their mortgage faster or reducing their overall debt, that are better served by a short-term mortgage.

Of course, there are also some potential downsides to short-term mortgages, such as the risk of interest rate fluctuations and the possibility of higher monthly payments if interest rates rise. It’s important for borrowers to carefully consider their financial situation and goals when choosing between short-term and long-term mortgages. Having a consultation with our team to understand the pros and cons of different mortgage options and to find the best fit for their needs.