Pros and cons of a 10-year fixed mortgage: Is stability worth the cost?

While the vast majority of homeowners opt for the familiar 5-year fixed term, a tiny percentage of Canadians prefer the stability that comes with locking in a 10-year rate.

In an unpredictable world where interest rates fluctuate, a 10-year fixed mortgage can offer peace of mind with long-term, stable payments. However, this product comes with trade-offs, like slightly higher interest rates and potentially large prepayment penalties. That said, in certain situations, it can be the perfect solution for homeowners who prioritize predictability over short-term savings.

In this article, we’ll explore real-life stories from Canadian mortgage brokers and their clients who opted for 10-year fixed mortgages—some with great success, and others who faced unexpected challenges. 

We’ll also examine why this option remains niche and the factors you should consider before locking in for a decade.

The appeal of the 10-year fixed mortgage

Most Canadian homeowners go with the 5-year fixed term because it strikes a good balance between interest rate security and flexibility. With a 5-year term, you have the option to renegotiate your mortgage every few years without committing to a long-term deal. 

Only about 1-3% of Canadian borrowers choose the 10-year fixed term. But for those who are tired of the uncertainty that comes with rate fluctuations, the 10-year fixed term can lock in a predictable rate for the next decade.

The downside? A higher interest rate. While locking in for 10 years may sound appealing, the extra cost can be significant. Typically, these rates run 0.5% to 1% higher than a 5-year rate.

Mortgage maven Ron Butler puts it bluntly: “On average, the 10-year fixed mortgage makes up only 2% of all mortgages. There’s little demand for it, and it’s rarely a winning move.” Even when 5-year fixed rates were as low as 1.49%, 10-year rates were at least 0.5% to 0.9% higher, usually around 2.09% or more. This premium, Butler explains, is hard for many homeowners to justify, especially in today’s high-rate environment.

In short, the additional cost upfront is what deters most borrowers from choosing a 10-year term. But for some, it’s a trade-off they’re willing to make for long-term peace of mind. For those who value certainty over flexibility and expect rates to rise further, locking in for 10 years can be a smart move.

The risks and penalties of breaking a 10-year mortgage

While some homeowners benefit from locking in long-term rates, others learn the hard way about the penalties associated with breaking a 10-year mortgage early. In Canada, prepayment penalties can be particularly steep during the first five years of a mortgage term. After that, the penalty drops to three months’ interest, as mandated by Canadian law.

Susan Thomas, Vice President of Haventree Bank, shared a story about a client who took out a 10-year fixed mortgage because it matched their remaining amortization schedule. For this client, the long-term security was worth the initial cost, but the potential for early penalties is something every homeowner should consider.

K.C. Scherpenberg, an Orillia broker who has handled several 10-year fixed mortgages, agrees the first five years are key. 

“Most clients need to be absolutely certain they won’t need to make any big changes during that time,” he notes. Once you pass the five-year mark, the penalties become less of an issue, but before then, they can be quite daunting.

10-year mortgage stories from mortgage brokers across Canada

Let’s take a look at a few real-life examples to see how this all plays out.

Angela Epp from Cochrane, Alberta, shared the story of a client who locked in a 10-year fixed mortgage at 2.50% in 2020/2021 with a chartered bank.

“They were thrilled to secure such a low rate, especially since rates were starting to rise,” Epp recalls. Today, with rates hovering much higher, this client feels they made a smart decision, knowing their payments will remain steady for the next several years.

In this case, the slight premium they paid for the 10-year term is now seen as a bargain. “They have no concerns about rising payments, and the stability has provided them peace of mind,” Epp adds. For homeowners like this, long-term predictability can be priceless—particularly when rates soar.

But not every experience with a 10-year mortgage is smooth sailing. Vancouver-based Jonathan Barlowshares a cautionary tale of clients who took out a 10-year fixed mortgage in 2016 at 3.25%. “They were in their late 30s with solid incomes, but life changed unexpectedly after two years when they needed to up-size their home,” Barlow says.

Unfortunately, they couldn’t port their mortgage to the new property and ended up paying over $40,000 in penalties to break the mortgage early. This case highlights the risks of committing to such a long-term product when future life changes aren’t accounted for.