What's the difference between fixed and variable rates?
Whether you're buying your first home, renewing your mortgage or refinancing, choosing the right interest rate matters. Compare fixed and variable mortgage rates to understand how they work, their benefits and which option may be right for you.
Fixed rate
Predictable payments
Consistent monthly payments make budgeting easy — no surprises, no guesswork.
Certainty over your term
Know exactly how much you’ll pay off over your term, down to the dollar.
Peace of mind
If rates rise, yours doesn’t. Your rate stays locked for your entire term.
A fixed-rate mortgage means your interest rate stays the same for the entire time you’re paying back your loan. It’s like having a set price tag on your mortgage that doesn’t change, providing you with steady and predictable monthly payments.
Things to know:
- When you make a mortgage payment, some money will go towards the actual loan amount you borrowed (the principal) and the remainder covers the interest charged on the loan. At the start of your mortgage, more of your money goes toward paying off interest. Over time, as your principal goes down, more of your payments will go toward paying down the overall mortgage. It’s like slowly building ownership in your home.
- If you choose a closed fixed-rate mortgage, there may be penalties if you want to pay off your loan early or want to make certain changes to it. Before making any changes in your payment plans, be sure to understand your mortgage contract and speak with a financial advisor to learn more.
Variable rate
Potential savings
When rates drop, more of your payment goes to your principal — paying you down faster.
Same payment, shifting split
Your payment amount stays the same — only the interest and principal portions change.
Made for the flexible
A fit for those comfortable with some risk in exchange for potential reward.
With a variable rate mortgage, your monthly mortgage payment will be the same but the portions that goes towards interest and the principal can change. If interest rates go up, more of your payment will cover interest. If the interest rate drops, a larger portion of your payment will go towards the principal of your loan. Because of this, how long it will take to pay back your loan is unpredictable.
Things to know:
- Be aware that with a variable-rate mortgage, your payments could go up if interest rates increase. This means if the interest you pay becomes more than what your payment covers, your monthly payment may go up.
- Variable rates are tied to market conditions. If interest rates are predicted to rise, it might be a sign that your payments could go up too. Keep an eye on economic trends to predict potential adjustments in your mortgage payments.
Which one is best for you?
Both fixed and variable rates have advantages. The best choice depends on what matters most to you.
Fixed rate mortgage
You value stability and predictability above all. Your payments stay the same for your entire term, budgeting is simple and rising rates can’t touch you. Best for first-time buyers finding their footing, tight budgets and anyone who sleeps better knowing exactly what’s coming.
Variable rate mortgage
You’re willing to take on some risk in exchange for the possibility of paying less interest over the life of your mortgage. Your budget can handle some fluctuation, you follow the market with interest, and you like the idea of paying your loan down faster when rates dip.
Tools to help you plan your mortgage.
Common questions.
Here’s what people ask us the most.
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A fixed mortgage rate stays the same for your entire mortgage term, giving you predictable payments. With a variable mortgage rate, the amount of your payment that goes toward interest and principal can change as interest rates rise or fall.
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The Bank of Canada sets the overnight interest rate, which influences the prime rate used by financial institutions. Since variable mortgage rates are tied to prime, changes to the Bank of Canada’s rate can affect your mortgage rate and the amount of interest you pay.
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With a Conexus variable-rate mortgage, your payment amount typically stays the same, but the portion applied to interest and principal changes as interest rates fluctuate. If rates rise significantly, your payment may need to increase.
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Consider your budget, financial goals and comfort with risk. If predictable payments give you peace of mind, a fixed rate may be the right choice. If you're comfortable with some uncertainty in exchange for potential interest savings, a variable rate may be worth considering. A Conexus Advisor can help you compare your options.
Still weighing fixed against variable?
The right rate depends on your budget, your risk tolerance and your plans. Our Mobile Mortgage Specialists and Financial Advisors will walk you through both options, run the numbers for your situation and help you choose with confidence.
