Mortgage Introduction

Fixed rate or Variable Rate

When you take out a fixed-rate mortgage, your interest rate will not change throughout the entire term of your mortgage. As a result, you will always know exactly how much your payments will be and how much of your mortgage will be paid off at the end of your term. With a variable-rate mortgage, your rate will be set in relation to the Bank of Canada at the beginning of each month. In other words, it may vary from month to month.

Historically, variable-rate mortgages tend to cost less than fixed-rate mortgages when interest rates are fairly stable. When rates change, your payment amount remains the same. However, the amount that is applied toward interest and principal will change.

If interest rates drop, more of your mortgage payment is applied to the principal balance owing. This can help you pay off your mortgage faster.