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Fixed vs Variable Mortgage Rates: Making the Right Choice

Wednesday Dec 06th, 2023


Navigating the world of mortgages can be complex, but understanding the difference between fixed and variable mortgage rates is crucial in making an informed decision. At Jamie Vieira & Associates we're committed to helping you understand these options. This way you can choose the best path for your financial future.

Understanding Fixed Mortgage Rates

Fixed mortgage rate showing a scale with percent on the left and house on the right showing how fixed mortgage works

Fixed mortgage rates offer stability and predictability, making them a popular choice in Canada. With this type of mortgage, your interest rate and monthly payments remain constant throughout the term, regardless of market fluctuations. This consistency aids in budget planning and offers peace of mind, especially for long-term homeowners.

Types of Fixed-Rate Mortgages:

Closed Mortgages: These are more common and typically have lower rates. However, they offer limited flexibility for early repayment, and breaking the mortgage can incur significant penalties.

Open Mortgages: These offer more flexibility, allowing you to pay off your mortgage early without penalties, but usually come with higher rates.

Advantages of Fixed-Rate Mortgages:

Predictable Payments: Your monthly payments remain unchanged, simplifying budgeting and financial planning.

Interest Rate Stability: Regardless of market changes, your interest rate stays the same, protecting you from rate increases.


Higher Rates: Fixed rates are generally higher than variable rates at the outset.

Limited Flexibility: Early repayment or refinancing can result in substantial penalties.

Exploring Variable Mortgage Rates

variable mortgage rates showed by toy blocks with percent symbol on one and up and down green and red arrows on the other indicating a variable mortgage rate

Variable mortgage rates change with your lender's prime rate, offering potential savings but also introducing uncertainty. These rates can fluctuate, affecting your interest payments and, in some cases, your monthly payment amount.

Types of Variable-Rate Mortgages:

Fixed Payment Variable-Rate: Your monthly payment remains the same, but the proportion of interest to principal changes with rate fluctuations.

Adjustable-Rate Mortgages (ARMs): Your monthly payments vary with interest rate changes, offering less predictability but direct benefits from rate decreases.

Advantages of Variable-Rate Mortgages:

Potential Savings: If interest rates decrease, you pay less interest compared to fixed-rate mortgages.

Lower Break Penalties: Typically, the cost to break a variable-rate mortgage is lower than for fixed-rate mortgages.


Rate Fluctuations: Your interest payments can increase if rates rise, potentially affecting your budget.

Conversion Costs: Switching to a fixed-rate mortgage later may result in higher rates than initially available.

Fixed vs Variable Mortgage Rates: Which to Choose?

Your choice depends on your comfort with risk and your financial situation. Fixed-rate mortgages offer security and ease of budgeting, ideal for those planning to stay in their home long-term. Variable-rate mortgages can be more cost-effective if you're comfortable with fluctuating rates and have the flexibility to handle potential payment increases.

The Risks of Variable-Rate Mortgages

Variable rates are unpredictable and can rise unexpectedly, leading to increased payment amounts. This uncertainty can be challenging for those on a fixed budget or those uncomfortable with financial risk.

Making Your Decision

Consider your financial stability, risk tolerance, and long-term housing plans when choosing between fixed and variable mortgage rates. Jamie Vieira & Associates can provide expert guidance, helping you navigate these choices to find the best fit for your home-buying journey.


How can I save for a down payment?

Start by setting a savings goal based on your target home price and desired down payment percentage. Create a budget that prioritizes saving, and consider opening a high-yield savings account specifically for your down payment. Look for ways to increase your income and remember, every bit counts towards your goal.

What are the benefits of a larger down payment?

A larger down payment reduces your monthly mortgage payments and overall interest paid. It can also eliminate the need for private mortgage insurance (PMI), saving you money in the long run. Plus, a substantial down payment can make your offer more attractive in competitive markets.

Are there assistance programs for first-time homebuyers?

Yes, in Canada, programs like the First-Time Home Buyer Incentive and the Home Buyers’ Plan offer financial assistance and benefits to first-time buyers. These programs can help lower monthly payments, provide tax advantages, and facilitate access to homeownership.

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