Fixed Rate vs. Variable Rate

The decision to choose a fixed or variable rate is not always an easy one. It should depend on your tolerance for risk as well as your ability to withstand increases in mortgage payments.
Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative. For example, young couples with large mortgages relative to their income might be better off opting for the peace of mind that a fixed-rate brings.
A variable rate mortgage often allows the borrower to take advantage of lower rates – the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus or plus a set percentage. For example, if the current prime mortgage rate is 2.45 percent, the holder of a prime minus 1.05% percent mortgage would pay a 1.40 percent variable interest rate.
Variables come with many strategies. One, you will almost always have a 3 month interest penalty to break the mortgage early. Another strategy would be to take the variable rate of interest and save money and use the difference in the interest savings and use those savings to pay the mortgage down faster. On average this strategy alone helps pay the mortgage down by about $8,000-$9,000.


In a layperson’s language, we can define a fixed-rate mortgage as a static mechanism wherein the mortgage rate, and monthly payment remain the same for the entire mortgage term. On the contrary, the mortgage rate in a variable-rate mortgage will change depending upon the prime lending rate, as set by the lender. If you want to know more about fixed and variable mortgage rates and determine which is right for you, get in touch with the licensed mortgage professional.


Fixed-rate mortgages are best for clients who want stability in their payments. If you desire predictability and have a tight monthly budget to manage, then a fixed-rate interest is the right one for you. On the contrary, a variable rate mortgage is appropriate for borrowers who want to take advantage of the lower interest rates and are ready to toy with different strategies. Variable-rate mortgages come with a lot of options. To begin with, you will almost always have a three-month interest penalty to break the mortgage early. Likewise, you can save money by using the difference in the interest savings and paying the mortgage faster.

History has shown that variable mortgage rate shoppers do better long term than fixed rate mortgage holders.
If you are unsure about the type of mortgage rate you want, contact us for a candid discussion. We can assure you that an open engagement with our experts will help you fully understand the risks and rewards of each type of mortgage rate and make the wisest decision.