When you take out a closed mortgage you can lock in the interest rate that you pay for a certain length of time, known as the term. The term of most mortgages is from one to five years, however, 6-month terms are available as are longer terms of up to 10 years. Generally, you will want to choose a longer term when interest rates are low and shorter terms when interest rates are high. The interest rate for shorter term mortgages tend to be lower than longer term mortgages because there is a shorter guaranteed rate protection period. If you think interest rates are going to be stable or trend lower, you can save on interest by choosing shorter term mortgages with better rates. If you want the security of knowing that your rate won’t increase for a long time, you should choose a longer term to protect yourself against rising rates.
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