Can You Compare a 1-Year and 5-Year Mortgage Term?

Direct answer: You can compare a 1-year mortgage term with a 5-year term, but you should not rank them by total dollars over their original terms. A 1-year term naturally has less interest because it covers only 12 months. To make a fair decision, compare payment, rate risk, ending balance after the same time horizon, penalties, flexibility and what rate you may face after the 1-year renewal.

The Mortgage Renewal Offer Analyzer Canada intentionally blocks a lowest-cost winner when term lengths differ. The usecos ChatGPT renewal analyzer can explain the warning and help normalize the offers. The rule is covered in the validation methodology.

Why unequal terms are not directly ranked

Question	1-year term	5-year term
How long is the rate locked?	12 months	60 months
How much interest is counted?	One year	Five years
What happens next?	You renew again sooner	You wait longer before renewal
Main risk	Future renewal rate risk	Penalty/flexibility risk if plans change

Worked example

Assume a $425,000 balance, 20-year amortization, monthly payments and semi-annual compounding. Offer A is 4.89% for five years. Offer B is 4.49% for one year.

Result	5-year offer	1-year offer
Scheduled payment	$2,767.60 monthly	$2,676.97 monthly
Interest counted in term	$94,728.13 over 5 years	$18,633.56 over 1 year
Principal repaid in term	$71,327.68	$13,490.14
Ending balance after term	$353,672.32 after 5 years	$411,509.86 after 1 year
Analyzer ranking	Not ranked	Not ranked

The 1-year offer shows lower interest only because the counted period is shorter. A fairer five-year decision needs assumptions for years two through five after the 1-year term renews.

Better ways to compare

• Compare the first-year payment and ending balance for cash-flow planning.
• Build scenarios for the next four years after the 1-year term ends.
• Ask how penalties differ if you sell, refinance or switch during the term.
• Compare prepayment privileges, portability and variable-rate exposure.
• Use the same term length when you want a clean lowest-cost winner.

Methodology and limitations

The worked example uses the usecos renewal engine and deliberately leaves the offers unranked because the term lengths differ. It does not forecast future rates, renewal spreads, penalties, lender approval, personal risk tolerance or the value of rate certainty. Verified July 30, 2026.

Sources: FCAC mortgage terms and amortization; FCAC renewing your mortgage; FCAC interest on mortgages; FCAC mortgage fees and prepayment penalties.