{"id":22554,"date":"2025-08-28T08:00:00","date_gmt":"2025-08-28T12:00:00","guid":{"rendered":"https:\/\/www.zolo.ca\/blog\/?p=22554"},"modified":"2025-08-28T08:10:29","modified_gmt":"2025-08-28T12:10:29","slug":"fixed-vs-variable-rate-mortgage","status":"publish","type":"post","link":"https:\/\/www.zolo.ca\/blog\/fixed-vs-variable-rate-mortgage","title":{"rendered":"Fixed vs Variable Mortgages: What&#8217;s the Difference?"},"content":{"rendered":"\n\n\n<p>When shopping for a mortgage, one of your biggest questions is whether you should choose a fixed vs. variable-rate mortgage. The majority of Canadians prefer a fixed-rate mortgage. According to <a href=\"https:\/\/wowa.ca\/mortgage-rates\">Wowa<\/a>, approximately 72% of all mortgages had a fixed rate as of April 2024. However, both have advantages and disadvantages.\u00a0<\/p>\n\n\n\n<p>Several factors must be considered, so to help you make the decision, here is a rundown of the differences between the two and how to make your final choice.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"key-takeaways\">Key Takeaways<\/h2>\n\n\n\n<ul class=\"wp-block-list\"><li>Fixed-rate mortgages maintain a consistent interest portion, while variable rates fluctuate based on the prime rate<\/li><li>Variable rates respond swiftly to changes in the prime rate, impacting payment distribution between principal and interest<\/li><li>Fixed rates offer stability but typically have higher interest rates and contract-breaking challenges<\/li><li>Variable rates are generally more flexible, with lower rates<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"difference-between-fixed-and-variable-rate-mortgages\">Difference Between Fixed and Variable-Rate Mortgages<\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\" id=\"fixed-rate-vs.-variable-rate-mortgage\"><img decoding=\"async\" width=\"1024\" height=\"1628\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/01\/Difference-Between-Fixed-vs-Variable-Rate-Mortgage-1024x1628.png\" alt=\"fixed vs variable mortgage rates\" class=\"wp-image-22556\"\/><\/figure>\n\n\n\n<p>Whether you choose a fixed-rate or variable-rate mortgage, <strong>your mortgage payments will stay the same<\/strong>. The difference is in how much of that payment goes to the principal (the money you initially opted to pay back) versus the interest (the cost of borrowing said money).&nbsp;<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/what-to-look-for-house-hunting\">What to Look for When Buying a House<\/a><\/p><\/section>\n\n\n\n<p>With a fixed-rate mortgage, the interest portion of your mortgage payment will be consistent throughout the entire duration of the term based on the agreed-upon rate in the contract. However, with variable-rate mortgages, the amount allotted to interest can increase or decrease depending on how the <a href=\"https:\/\/www.bankofcanada.ca\/rates\/daily-digest\/\">prime rate<\/a> fluctuates. The prime rate is the interest rate that Canadian lenders and financial institutions use to determine the interest rate they\u2019ll charge for various debts, including variable-rate mortgages.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What Is a Fixed-Rate Mortgage?<\/h3>\n\n\n\n<p>A <a href=\"https:\/\/www.zolo.ca\/blog\/what-is-a-fixed-rate-mortgage\">fixed-rate mortgage<\/a> means you will have the same interest rate over the length of the term. <a href=\"https:\/\/www.canada.ca\/en\/financial-consumer-agency\/services\/mortgages\/mortgage-terms-amortization.html\">Mortgage terms<\/a> vary from six months to 10 years, but most Canadians choose a five-year term.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Pros<\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Consistent payments<\/strong> &#8211; Your mortgage payment won\u2019t change until the end of the term<\/li><li><strong>Set it and forget it<\/strong> &#8211; Once you start paying your mortgage, nothing changes until renewal time<\/li><li><strong>Protects from rising interest rates<\/strong> &#8211; Even if interest rates rise, you pay the same rate for the entire term<\/li><li><strong>Easier to compare rates<\/strong> &#8211; When shopping around, it\u2019s easy to compare rates between different providers<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Cons<\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Could pay a higher rate for the consistency<\/strong> &#8211; Fixed interest rates are typically higher than variable rates<\/li><li><strong>Fixed rates are historically more expensive than variable rates <\/strong>&#8211; Over the life of the mortgage, you may pay more in interest when you opt for a fixed-rate mortgage<\/li><li><strong>Stiffer penalties if you plan to switch rates or end a contract<\/strong> &#8211; You will likely pay a prepayment penalty if you wish to shop for a lower rate or end your contract before the end of your term<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">What Is a Variable-Rate Mortgage?<\/h3>\n\n\n\n<p>A <a href=\"https:\/\/www.zolo.ca\/blog\/variable-rate-mortgage\">variable-rate mortgage<\/a> means your interest rate can change over time, although your payment stays the same.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Pros<\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Historically outperform fixed-rate mortgages<\/strong> &#8211; You\u2019ll typically save money long term by choosing a variable-rate mortgage; however, this is not always the case<\/li><li><strong>More flexible if you break your contract early<\/strong> &#8211; Less penalties if you plan to sell your home or pay off your mortgage early<\/li><li><strong>Can convert to a fixed-rate mortgage at any time<\/strong> &#8211; You have the option to convert to a fixed-rate mortgage at any point, should the market swing or you feel financial stress<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Cons<\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Lack of stability and consistency<\/strong> &#8211; Rates change often, meaning how much of your payment that goes toward your principal changes<\/li><li><strong>Rates can increase quickly<\/strong> &#8211; Prime rates are based on the Bank of Canada\u2019s overnight rate, which can potentially change up to eight times per year&nbsp;<\/li><li><strong>If you hit your trigger rate, you will have to increase your payments<\/strong> &#8211; If your monthly payment is only covering interest and not the mortgage principal, your payments will increase<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Variable vs. Adjustable-Rate Mortgages<\/h4>\n\n\n\n<p>An adjustable-rate mortgage (ARM) differs from a variable-rate mortgage. If you choose an adjustable-rate mortgage, your monthly payment will change based on the prime rate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Fixed vs. Variable-Rate Mortgage Differences<\/h3>\n\n\n\n<p>The main difference between fixed-rate and variable-rate mortgages is the interest rate and the percentage of your payment that goes toward the principal.<\/p>\n\n\n\n<div id=\"footable_parent_24997\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui colored_table\">\n                <table data-ninja_table_instance=\"ninja_table_instance_0\" data-footable_id=\"24997\" data-filter-delay=\"1000\" aria-label=\"Fixed vs Variable Rate Mortgage Differences\"            id=\"footable_24997\"\n           data-unique_identifier=\"ninja_table_unique_id_883813955_24997\"\n           class=\" foo-table ninja_footable foo_table_24997 ninja_table_unique_id_883813955_24997 ui table  nt_type_legacy_table hide_horizonal_borders hide_vertical_borders striped compact vertical_centered ninja_custom_color inverted footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_differences \">Differences<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_fixed_rate \">Fixed-Rate Mortgage<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_variable_rate_mortgage \">Variable-Rate Mortgage<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"17373\" class=\"ninja_table_row_0 nt_row_id_17373\">\n            <td>Mortgage payment<\/td><td>Stays the same for the mortgage term<\/td><td>Stays the same, unless you hit your trigger rate<\/td>        <\/tr>\n            <tr data-row_id=\"17374\" class=\"ninja_table_row_1 nt_row_id_17374\">\n            <td>Interest rate<\/td><td>Stays the same for the mortgage term<\/td><td>Changes with the prime rate<\/td>        <\/tr>\n            <tr data-row_id=\"17375\" class=\"ninja_table_row_2 nt_row_id_17375\">\n            <td>Amortization period<\/td><td>More predictable<\/td><td>May be impacted by interest rate changes<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n    \n    \n    \n<\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\" id=\"interest-rate-and-mortgages\">Interest Rate and Mortgages<\/h2>\n\n\n\n<p>When you have a variable-rate mortgage, if the rate rises, more of your mortgage payment will go toward interest, not the principal. However, if the rate decreases, more of your monthly payment will be put toward the home\u2019s principal. This means you are paying less interest.<\/p>\n\n\n\n<p>Since fixed-rate mortgages are considered safer, you typically pay a premium on your rate for the added security. In addition, it\u2019s more challenging to break a fixed-rate mortgage contract because of the consistency. Variable-rate mortgages, on the other hand, tend to have lower rates due to the volatility and are traditionally more flexible.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/why-is-housing-so-expensive-in-canada\">Why is Housing So Expensive in Canada?<\/a><\/p><\/section>\n\n\n\n<p>Another interesting difference between the two is how lenders calculate interest rates. In both cases, lenders determine fixed-rate and variable-rate mortgage interest rates using economic factors such as inflation, unemployment, and exports.&nbsp;<\/p>\n\n\n\n<p>However, variable interest rates are based on the prime lending rate, while lenders base fixed interest rates on bonds. As a result, banks will raise or lower their fixed mortgage rates in response to bond yield movements because they buy bonds to cover the high cost of lending to homeowners. Part of this means that banks or other lenders will be much quicker to change variable interest rates than fixed interest rates.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"<strong&gt;how-to-choose-between-a-fixed-or-variable-rate-mortgage<\/strong&gt;\"><strong>How to Choose Between a Fixed or Variable-Rate Mortgage<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"1696\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/01\/How-to-Choose-Mortgage-Type-1-1024x1696.png\" alt=\"how to choose between fixed rate vs variable rate mortgage\" class=\"wp-image-22558\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Pay Attention to the Market<\/h3>\n\n\n\n<p>Market conditions affect the interest rates of fixed and variable mortgage rates. Are rates low right now and likely to rise soon? A fixed-rate mortgage might be the most cost-effective bet to protect against that likely rise. Alternatively, a variable-rate mortgage is preferred if you expect interest rates to drop soon.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Compare Fixed vs. Variable Interest Rates<\/h3>\n\n\n\n<p>When comparing interest rates, it\u2019s important to consider all the factors, like prepayment penalties and portability (the ability to transfer your existing mortgage rate and terms to a new home).<\/p>\n\n\n\n<p>Then, consider the difference in rates offered between the two. If variable rates are significantly lower than fixed rates, then it\u2019s not worth paying the premium for the fixed rate. On the other hand, if they are both very close, it might be worth paying the premium for a fixed rate so you can count on the stability.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Consider Risk Level<\/h3>\n\n\n\n<p>Before you choose between fixed and variable interest rates, consider your personal risk tolerance. There is no one-size-fits-all solution, and both options have pros and cons.&nbsp;<\/p>\n\n\n\n<p>Generally, a fixed interest rate is considered more predictable since your interest rate and payments will stay consistent for the length of the term. Variable interest rates are considered more uncertain since the interest rate changes. It may take longer to pay off your mortgage, and hitting your trigger rate will cause a change in payment amount.<\/p>\n\n\n\n<p>If you are uncomfortable with financial uncertainty, a fixed rate may be your best option.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Speak to a Mortgage Professional<\/h3>\n\n\n\n<p>A <a href=\"https:\/\/www.zolo.ca\/blog\/why-use-a-mortgage-broker\">mortgage broker<\/a> will shop you around to different lenders to ensure you find the best mortgage rate possible. In addition, they provide personalized advice and can help you compare your options before choosing between fixed and variable interest rates.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"<strong&gt;average-mortgage-rates-in-canada<\/strong&gt;\"><strong>Average Mortgage Rates in Canada<\/strong><\/h2>\n\n\n\n<p>Mortgage rates change often, and we usually see plenty of fluctuation in the market. However, remember that the market only represents part of the interest rate you receive. A big part of your rate also depends on your personal circumstances, including your debt load, credit history, and how much risk a lender thinks you are.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/www.nerdwallet.com\/ca\/mortgages\/current-mortgage-rates-in-canada\">View Current Mortgage Rates<\/a><\/div>\n<\/div>\n\n\n\n<p>In addition, remember that different rates will apply to different term lengths. The most common term is five years, which is the most competitively priced option on the market.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"bottom-line\">Bottom Line<\/h2>\n\n\n\n<p>Deciding between a fixed-rate mortgage and a variable-rate mortgage can be challenging, so take the time to think it through before deciding. Then, consider the points listed above and include your comfort level.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/mortgage-renewal\">How to Complete Your Mortgage Renewal<\/a><\/p><\/section>\n\n\n\n<p>Whatever you decide, make sure to shop around. Different lenders will offer you different rates, so whether you&#8217;re looking for fixed or variable mortgages, you want to ensure you get the best rates.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"fixed-vs-variable-rate-mortgage-faq\">Fixed vs Variable-Rate Mortgage FAQ<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">What happens when a fixed rate ends?<\/h3>\n\n\n\n<p>At the end of a fixed-rate mortgage term, your mortgage will be up for renewal. At this point, you can renew your mortgage, look for another lender, negotiate your interest rate, or refinance.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What is the biggest drawback of an adjustable-rate mortgage?<\/h3>\n\n\n\n<p>The biggest drawback of an adjustable-rate mortgage is its lack of stability and consistency. Rates can increase quickly, which means your monthly payments change.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What are the problems with a fixed-rate mortgage?<\/h3>\n\n\n\n<p>The biggest downsides of a fixed-rate mortgage are that the interest rate may be higher than a variable rate, and historically, fixed-rate mortgages cost more in interest over the life of the mortgage. In addition, fixed-rate mortgages have stiffer penalties if you plan to change your mortgage contract.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Let&#8217;s compare the pros and cons of each mortgage type<\/p>\n","protected":false},"author":22,"featured_media":24996,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46],"tags":[],"guide":[],"class_list":["post-22554","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"acf":[],"zolo_excerpt":"","_links":{"self":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/22554","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/comments?post=22554"}],"version-history":[{"count":11,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/22554\/revisions"}],"predecessor-version":[{"id":25003,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/22554\/revisions\/25003"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media\/24996"}],"wp:attachment":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media?parent=22554"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/categories?post=22554"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/tags?post=22554"},{"taxonomy":"guide","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/guide?post=22554"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}