The average Canadian wastes $22,000 after tax during their life for every $100,000 of their mortgage and takes 38 months longer to pay it off, according to a study by Moshe Milevsky.
This is because of taking 5-year fixed mortgages instead of variable.
They are marketed as being safe and a good protection against a sharp rise in interest rates.
The reality, though, is that they are nearly always a huge waste of money, because the interest rate is nearly always higher and you lose your negotiating power for five long years.
From 1975-2019, 1-year fixed mortgages saved money 100% of the time. 5-year fixed will probably save money for 5 years starting 2020-22, but it may be decades until next time.
That is why we call it the “5-Year Fixed Mortgage Trap”.
Listen to my latest podcast episode to find out:
Why people take 5-year mortgages.
What you should do instead.
Why being aware of your negotiating power is key.
