Fixed vs. variable mortgage in Canada: which should you choose?

The actual difference

A fixed-rate mortgage locks your interest rate and payment for the whole term (often five years). Whatever happens in the economy, your rate doesn't move. A variable-rate mortgage is tied to your lender's prime rate, which follows the Bank of Canada. When prime moves, your rate moves — which changes either your payment or how much of each payment goes to principal, depending on the product.

The case for fixed

Fixed is about peace of mind. You know your exact payment for years, which makes budgeting simple and removes the stress of watching rate announcements. For first-time buyers stretching to afford a home, or anyone who simply sleeps better with certainty, that stability is worth a lot. The trade-off: you usually pay a slightly higher rate for it, and if you need to break the mortgage early, the penalty can be steep.

The case for variable

Historically, Canadians who chose variable have paid less interest over the long run than those who locked in — though that's an average across decades, not a promise for your specific term. Variable also tends to come with a much smaller penalty to break (commonly about three months' interest), and if rates fall, more of your payment quietly goes to principal. The catch is uncertainty: if rates climb, your cost rises, and not everyone's budget — or nerves — can handle that.

How to actually decide

Ask yourself three questions:

• How long will you realistically keep this mortgage? If there's a real chance you'll move, sell, or refinance before the term ends, variable's smaller break penalty can save you thousands.
• Could your budget absorb a higher payment? If a rate increase would genuinely strain you, the certainty of fixed is worth the small premium.
• How do you handle risk? Some people happily ride the ups and downs to chase savings. Others lose sleep. Both are valid — pick the one you'll be comfortable with.

Our take

There's no trophy for guessing the rate market. The best mortgage is the one that fits your life and your plan — and that's a conversation, not a coin flip. As an independent team we'll model both options against your numbers and your timeline, then let you decide with the full picture in front of you.