Fixed vs variable mortgage —
the honest comparison.
Fixed locks your rate and payment for the full term. Variable moves with prime. Neither is universally better — the right pick depends on your timeline, risk tolerance, and the penalty you'd pay to exit early.
What separates fixed
from variable.
The rate headline is rarely the deciding factor. The penalty and your timeline usually are.
Fixed = locked rate and payment
Your interest rate and monthly payment are set at signing and stay identical until renewal — no matter how many times the Bank of Canada moves rates. What you budget on day one is what you pay on day 1,825.
Variable = often cheaper at the start
Variable rates are priced as prime minus a discount, and they typically start below a comparable fixed rate. If rates hold flat or fall during your term, you capture those drops automatically.
The penalty gap is enormous
Breaking a variable mortgage costs roughly three months' interest — typically a few thousand dollars. Breaking a fixed can trigger an Interest Rate Differential (IRD) running into five figures at the big banks.
Variable can convert to fixed anytime
Almost every variable mortgage lets you lock into a fixed rate mid-term with no penalty — at whatever rate the lender offers that day. Fixed borrowers have no equivalent escape hatch.
Three steps to
the right answer.
Timeline first, penalty second, rate third.
That order matters more than the rate forecast.
Understand your situation
How long will you keep this mortgage? Could you absorb a higher payment if prime rises 1–2%? Would rate-hike headlines genuinely stress you out? These answers matter more than any rate forecast.
Compare on the factors that matter to you
Rate at signing, payment certainty, break penalty if you move or refinance, and whether you can convert mid-term. The 'right' product is the one that fits your timeline and risk tolerance — not whoever had the best rate last week.
Get pre-approved for the right product
We shop 100+ lenders on both fixed and variable terms, model the full five-year cost of each, and recommend only what we'd take ourselves in your position — with the penalty disclosed upfront.
Which is right
for you?
Tap any situation below to see which rate type fits — and why.
If you’re…You're a first-time buyer at the top of your budget
You're a first-time buyer at the top of your budget
When there's little room in the monthly budget, certainty wins. A fixed rate locks your payment so a Bank of Canada hike doesn't reshape your finances. Lock the payment, remove the variable, and revisit at renewal.
Lock my rateIf you’re…You might sell or refinance within 2–3 years
You might sell or refinance within 2–3 years
The much smaller break penalty on variable (≈ 3 months' interest vs a possible five-figure IRD) often outweighs any rate premium. If there's real chance you'll exit before the term ends, flexibility is the whole game.
Model my penaltyIf you’re…You can comfortably absorb a payment increase
You can comfortably absorb a payment increase
If a few hundred dollars more per month wouldn't change your life, you're positioned to capture variable's historical edge. You can also convert to fixed any time if the picture changes.
Start my applicationIf you’re…Rate-hike headlines genuinely stress you out
Rate-hike headlines genuinely stress you out
Peace of mind is a legitimate financial goal. If you'd anxiously track every Bank of Canada announcement, a fixed rate premium is buying you something real. We'd rather you sleep well than win a coin-flip.
Get a fixed rate quoteIf you’re…You want to refinance or port mid-term
You want to refinance or port mid-term
Variable mortgages can typically be ported or broken for just three months' interest. Fixed mortgages may require an IRD calculation that grows larger the further you are from renewal.
Explore refinance optionsIf you’re…You're undecided and want the best of both
You're undecided and want the best of both
A hybrid (50/50) mortgage splits your balance — part fixed, part variable — so you hedge both directions. Some lenders also offer shorter fixed terms as a middle path. We'll lay out every option side by side.
Compare my optionsFixed vs variable —
every factor compared.
Both pass the same stress test. The differences that matter are penalty size, payment certainty, and what happens if you exit early.
- First-time buyers who want one predictable payment to budget around
- Anyone stretched close to their maximum affordability
- People who'll keep the mortgage for the full term and value peace of mind
- Households where a payment jump would cause real stress
- Buyers who may sell, refinance, or port before the term ends
- People who can absorb a higher payment if rates rise
- Borrowers who want the much lower break penalty (typically ~3 months' interest)
- Anyone who believes rates will hold or fall over their term
| Factor | Fixed rate | Variable rate |
|---|---|---|
| How the rate is set | Locked at signing for the full term | Prime rate minus a set discount; moves with prime |
| Will my payment change? | No — same payment every month | Depends on the product: 'adjustable' payments change with prime; 'variable' payments can stay level with the principal/interest split shifting |
| Starting rate | Usually higher than variable at signing | Often lower at signing, but can rise |
| Break penalty (if you exit early) | Greater of 3 months' interest or IRD — often very large | Usually just 3 months' interest — far smaller |
| Best when rates… | Are rising or you want certainty | Are flat or falling, or you'll exit early |
| Mortgage stress test | Qualify at your rate + 2% or 5.25%, whichever is higher | Same stress test applies — no easier to qualify |
| Convert mid-term? | N/A | Can usually convert to a fixed rate at any time, no penalty |
| Peace of mind | High — set and forget | Lower — you watch rate announcements |
Variable if you may exit early or want a smaller penalty.
Common questions,
clear answers.
Penalties, rate changes, stress test, and conversions — answered plainly.
Is a fixed or variable mortgage better in Canada right now?
It depends on where rates are in the cycle and on you. When rates are expected to fall, variable lets you capture the drops without breaking your mortgage; when rates are rising or you need certainty, fixed protects you. Crucially, your timeline matters as much as the forecast — if you may exit early, variable's low break penalty often tips the scales. We model both against your real numbers before you decide.
Can I switch from variable to fixed later?
Yes. Almost every variable mortgage lets you convert to a fixed rate at any point during the term with no penalty — you'd take the lender's fixed rate available that day for the time remaining. This is a big part of variable's appeal: you keep the option to lock in if the outlook changes.
Why is the penalty to break a fixed mortgage so high?
Fixed penalties use the greater of three months' interest or the Interest Rate Differential (IRD). The IRD compensates the lender for the interest they'll miss if current rates are lower than your contract rate, and big-bank posted-rate IRD formulas (today's posted rate for your remaining term minus the discount you got at signing, which lowers the comparison rate and widens the gap) can produce penalties in the tens of thousands. Variable penalties are almost always just three months' interest — far smaller.
Does a variable rate let me qualify for a bigger mortgage?
No. Both fixed and variable borrowers must pass the stress test at their contract rate plus 2% or 5.25%, whichever is higher. The lower starting rate on a variable doesn't increase your maximum mortgage — the choice is about cost and risk over the term, not approval size.
What happens to my variable payment if rates rise?
It depends on the product. With an adjustable-rate mortgage (ARM), your payment rises directly with prime. With a level-payment variable (VRM), the payment stays the same but more of it goes to interest — until you hit the 'trigger rate,' after which the lender requires a higher payment. Always ask which type you're being offered.
What is a hybrid or 50/50 mortgage?
It splits your balance into a fixed portion and a variable portion, so part of your payment is locked and part moves with prime. It hedges both directions and can suit an undecided borrower, though it adds some complexity and can make switching lenders at renewal harder.
We’ll try to beat your rate.
If we can’t, we pay you $500.¹
¹ Rate Beat: eligible Big-6 bank written offers only · same product, term & amount · $500 paid to you or your nominated charity at closing · conditions apply
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Fixed or variable, the rate you're offered depends on the lender and who's shopping for you. Our advisors serve buyers and homeowners across Canada — find your city and get a same-day quote on both rate types.