Should I choose a fixed-rate or variable-rate mortgage?
Both options have advantages, and the right choice depends on your financial situation and comfort level. A fixed-rate mortgage provides more predictable interest costs during the term, while a variable-rate mortgage can fluctuate with changes in interest rates. It's also important to consider mortgage terms, payment flexibility, prepayment privileges, and potential penalties if you need to break your mortgage early. I recommend discussing the options with a qualified mortgage broker or lender who can help you choose a product that fits your circumstances.

Fixed vs. Variable Mortgages at a Glance


  • Fixed rates offer stable payments for the full term.
  • Variable rates move with the lender's prime rate and the Bank of Canada's policy rate.
  • Penalties for breaking a mortgage can differ significantly between the two.
  • Your comfort with risk and future plans should guide the choice.

How Fixed-Rate Mortgages Work


Your interest rate and payment stay the same for the term, often five years. This makes budgeting simple. Breaking a fixed mortgage early can be costly, because the penalty is often the greater of three months' interest or an interest rate differential (IRD).


How Variable-Rate Mortgages Work


Your rate is tied to your lender's prime rate. With some variable mortgages, your payment changes when rates change. With others, the payment stays the same but more or less goes toward principal. The penalty to break a variable mortgage is usually three months' interest, which can be much lower than an IRD penalty.


Other Features to Compare


  • Term length, from short terms to five years or more
  • Prepayment privileges for lump sums or increased payments
  • Portability if you buy another home
  • Whether the mortgage is registered as a standard or collateral charge
  • Options to convert from variable to fixed

Questions to Ask Yourself


  • Would a payment increase strain my budget?
  • Could I need to sell or refinance before the term ends?
  • Do I plan to make extra payments?

Get Expert Advice


A qualified mortgage broker or lender can compare current products and show you how each option fits your plans and comfort level.