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Fixed Interest Rate vs. Adjustable/Variable Interest Rate

Fixed Rate Mortgage

A Fixed Mortgage is a product with an interest rate that does not fluctuate during the term of your mortgage. Since the interest rate is “fixed”, the regular principal and interest payment amount remain the same for the term. This is an important consideration for many borrowers who may not be able to afford higher mortgage payments.

Adjustable/Variable Rate Mortgage

An Adjustable/Variable Rate Mortgage is a product with an interest rate that may change during the term of the mortgage. The interest rate is typically based on the lender’s Prime Rate, plus or minus a variance. When the lender’s Prime Rate changes, the mortgage’s interest rate changes as well, which may result in the regular mortgage payment amount and the allocation of principal and interest to fluctuate accordingly. For some mortgages, the regular payment may not change with changes in the interest rate. For this type of mortgage, when the interest rate increases, more of the mortgage payment amount will go towards interest and less to principal repayment.

Some adjustable/variable rate mortgages have the option to “convert” the mortgage (with certain terms and conditions, and possibly fees) to a fixed interest rate mortgage before the maturity date. The fixed interest rate at the time of any conversion may be higher than the adjustable/variable interest rate, or the fixed interest rate available at the beginning of your term.

Deciding On The Right Interest Rate Type

Adjustable/variable interest rates are often, although not always, lower than fixed term interest rates. This can make adjustable/variable interest rates appear attractive to borrowers looking to save money or have lower regular payments, however, it is important to note that no one can accurately predict future interest rates.  

Selecting the interest rate type that is right for you requires balancing the potential for saving money with lower regular payments, with the risk of higher interest costs and higher regular payments if interest rates rise. When considering which interest rate type is right for you, you must determine which factors to consider are most important to you.


Fixed Interest Rate

Adjustable/Variable Interest Re


  • Your regular payments remain the same over the term.
  • Certainty, over how much principal will be paid off over the term.


  • Your regular payments may increase or decrease over the term.
  • Your interest rate may go “down” during the term, saving you interest costs.



  • You are not able to benefit from lower interest rates during the term.  
  • Your interest rate may go “up” during the term, increasing your interest costs and your regular payment amount. 
  • Less certainty, over how much principal will be paid off over the term.

Always consult your mortgage disclosure and/or your mortgage professional when deciding what product is right for you.  Review your mortgage disclosure/ documentation to understand the terms and conditions that relate to your mortgage.