Does a 4 year fixed rate make more CENTS than a 5 year fixed rate?

by Jay Calafiore

Borrowers often find they need to break the term of their mortgage to plan for major life events such as renovations, sending children to school or moving to a larger home.

SAVE yourself costly penalties, pay LESS interest and enjoy LOWER payments!

For a limited time only, one of our top Mortgage Lenders has an extremely

low 4 Year Fixed Rate mortgage. 3.09%!

  1. 1. You are potentially saving a penalty of $1,944** if you were to break your mortgage in year 4 of a 5 year term.
  2. 2. You get a lower interest rate.
  3. 3. By the end of the 4th year you will have paid off more principal and you will have paid less interest.

You will have paid $965 more towards paying down your mortgage principal!

You will have paid $2,902 less in interest payments!

Your total 3 year payments will be almost $1,945 lower!

4 Year Fixed vs. 5 Year Fixed Term Payment Comparison

Term Principal

Pay Down





4 Year Fixed $ 21,618.25 $ 29,430.23 $ 51,048.48
5 Year Fixed $ 20,661.80 $ 32,332.12 $ 52,993.92
Difference after 4 years of payments $ 965.45


$ 2,901.89


$ 1,945.44



  • 4 Year rate of 3.09% vs. 5 Year rate of 3.39%.
  • $250,000 mortgage amount with monthly payment at a 30 year amortization.
  • Calculations compare the results at the end of the 4th year between a 4 year fixed term vs. a 5 year fixed term mortgage. (Source:  D+H Filogix Express Calculator – Mortgage Analyzer)

**Penalty for fixed rate mortgages:

  • Penalty is the greater of 3 months interest or IRD* for fixed rate mortgages.  The calculation for IRD is $881.05 based on an original rate of 3.39% and remaining term of 12 months at a rate of 2.99%.  The 3 months interest calculation is $1,943.64.  The 3 months interest penalty would be charged in this scenario.

* IRD (Interest Rate Differential) is a penalty that may apply if you pay off your mortgage prior to the maturity date, or pay the mortgage principal down beyond the amount of your prepayment privileges.  The IRD calculation used by mortgage lenders may vary and this may not be applicable to all scenarios.

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