Fixed Vs. Variable
🔒 Fixed-Rate Mortgage
A fixed-rate mortgage locks in your interest rate for the entire term (commonly 1–5 years in Canada).
How It Works
Your rate and payment stay the same for the full term — even if market rates rise or fall.
Pros
✔ Predictable monthly payments
✔ Protection from rising interest rates
✔ Easier budgeting
Cons
✘ Typically higher starting rate than variable
✘ Penalties may apply if you break the mortgage early
Best For
First-time homebuyers
Families on a strict budget
Anyone who values stability and peace of mind
📉 Variable-Rate Mortgage
A variable-rate mortgage fluctuates based on your lender’s prime rate, which is influenced by the Bank of Canada.
How It Works
When the Bank of Canada changes its policy rate, lenders may adjust their prime rate. Your interest cost changes accordingly.
Some variable mortgages:
Keep payments the same (more goes to interest if rates rise)
Adjust the payment amount when rates change
Pros
✔ Often lower starting rate
✔ Potential savings if rates decrease
✔ Historically has outperformed fixed over long periods
Cons
✘ Less predictable
✘ Payments or interest costs may increase
Best For
Borrowers comfortable with market fluctuations
Those who can handle potential payment increases
Homeowners planning shorter terms
