Choosing between a fixed and variable mortgage rate is one of the important decisions homeowners will make. Both options have their advantages, but the right choice depends on your financial situation and risk tolerance.
Fixed Rate: Stability and Predictability
A fixed rate offers stability, with payments that stay the same for the entire term. This is ideal if you:
Prefer predictable payments with no surprises.
Want to budget long-term without worrying about interest rate fluctuations.
Feel more comfortable knowing your rate won’t increase.
However, if you need to break your mortgage before the end of the term, penalties can be significant. Fixed-rate mortgages may come with an interest rate differential (IRD) penalty, which can be much higher than other options.
Variable Rate: Flexibility and Potential Savings
A variable rate fluctuates with the prime rate, meaning your payments could go up or down during your term. However, these changes don’t happen daily—rates are adjusted based on scheduled Bank of Canada meetings, where decisions on rate changes are made. This option often costs less over time when rates are stable or decreasing. It may be a good choice if you:
A variable rate fluctuates with the prime rate, meaning your payments could go up or down during your term. This option often costs less over time when rates are stable or decreasing. It may be a good choice if you:
Are comfortable with some fluctuation in your payments.
Want to take advantage of historically lower rates.
Might break your mortgage early—variable-rate penalties are typically just three months’ interest, much lower than fixed-rate penalties.
What’s Right for You?
Choose fixed if you want stability and certainty in your monthly payments.
Choose variable if you're comfortable with fluctuations or if there’s a chance you’ll break your mortgage before the term ends.
Let’s Find the Best Option for You
If you’d like more information about fixed or variable rates, feel free to reach out!
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