MORTGAGE BASICS · EXPLAINED
Fixed vs variable: which one actually fits you?
It's one of the first big questions every borrower asks, and there's no universally right answer. Here's the honest, plain-language version — how each one works, what changes if rates move, and the questions Rahul would walk you through before picking one.
Educational only — not personalized financial advice. Your file, your goals, and current market rates all matter. That's the conversation to have with Rahul.
Fixed-rate mortgage
You lock your rate for the whole term — usually 3 or 5 years. Same rate, same payment, every single month.
- Your rate
- Locked for the full term
- Your monthly payment
- Same every month — predictable to the dollar
- If rates rise
- Nothing changes. You're insulated.
- If rates fall
- Nothing changes. You don't get the savings.
- Break penalty
- Greater of 3 months' interest or the IRD — can be thousands if you break early.
A good fit if…
- You want a number you can budget around for years
- Rising rates would genuinely stress you out
- You're confident you'll stay in the home for the term
Watch out: Breaking a fixed mortgage early (a sale, a separation, a refinance) can be expensive. Plan the term to match your life, not the other way around.
Variable-rate mortgage
Your rate is tied to your lender's prime rate. When the Bank of Canada moves, your mortgage moves.
- Your rate
- Prime minus a discount (e.g. Prime − 0.90%)
- Your monthly payment
- Depends on the product — ARM payments move with prime; VRM payments usually stay fixed but the split between principal and interest shifts.
- If rates rise
- Either your payment goes up (ARM), or more of your payment goes to interest and less to principal (VRM).
- If rates fall
- Your interest cost drops automatically. You feel rate cuts on the next payment cycle.
- Break penalty
- Usually just 3 months' interest — far smaller than fixed.
A good fit if…
- You believe rates are flat or trending down over your term
- You might sell, refinance, or move in the next few years
- A payment change wouldn't blow up your budget
Watch out: Rates can move faster than anyone expects. Make sure you'd still sleep at night if your payment went up a few hundred dollars.
A 30-second mental model
Fixed is insurance. Variable is the market price.
A fixed rate is usually a little higher than variable on day one — that gap is the price you pay for certainty. If rates rise sharply, your "insurance" pays off. If rates fall or stay flat, you slightly overpaid for peace of mind. Variable flips it: you usually start lower and ride whatever the Bank of Canada does next.
Neither is the "smart" choice. The smart choice is the one your budget and your sleep can handle.
One thing most people miss about variable
"Variable rate" actually covers two different products, and the difference matters when rates move:
ARM — Adjustable-Rate Mortgage
Your payment moves
When prime goes up, your payment goes up. When prime drops, your payment drops. Your amortization stays roughly on schedule.
VRM — Variable-Rate Mortgage
Your payment stays the same
The dollar amount you pay doesn't change, but the split between principal and interest does. If rates climb a lot, you can hit a "trigger rate" where the lender asks you to bump your payment up.
Most big banks default to VRM. Many monoline lenders default to ARM. Rahul will tell you exactly which one a given lender is offering before you sign anything.
Four honest questions to ask yourself
Forget "what do the experts think?" for a minute. These are the questions that actually decide it for most people.
If my mortgage payment went up $300/month next year, would I be okay?
If the honest answer is 'no, that would hurt,' fixed is doing real work for you. If the answer is 'I'd grumble but it's fine,' variable is back on the table.
How long do I realistically expect to keep this mortgage?
If there's a real chance you'll sell, move, or refinance in the next 1–3 years, the smaller break penalty on variable can save you a lot. If you're settling in, a fixed term you can grow into often wins.
Do I want certainty, or do I want to ride the market?
There's no wrong answer here. Some people sleep better knowing their payment to the dollar. Others are fine with a bit of movement in exchange for usually starting at a lower rate.
Do I have an opinion on where rates are headed?
Be honest — most people (including economists) don't, really. Rahul won't pretend to either. Pick the structure that fits your life; don't try to time the Bank of Canada.
What Rahul actually looks at with you
When a client asks Rahul "fixed or variable?", he doesn't answer with a guess about rates. He walks through a short list:
- Your real budget — not the stress-test number, the one you'd actually live with.
- How long you realistically expect to keep the mortgage.
- Whether you might break the term early (sale, refinance, move).
- Your comfort with payment changes vs. needing a fixed number.
- The current rate gap between fixed and variable — sometimes it's tiny, sometimes wide.
- Lender-specific quirks: ARM vs VRM, prepayment privileges, portability, penalty math.
Then — and only then — there's a recommendation. No pitch, no pressure, no "everyone's doing variable right now."
Want to talk it through with a human?
Tell Rahul a bit about your situation — how long you'd keep the mortgage, how steady your income is, how you feel about a payment change. Fifteen minutes, no pitch, no pressure. You'll leave knowing which way to lean and why.
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