Fixed vs Variable

Fixed buys you certainty. Variable buys you a usually-lower starting rate and a front-row seat to every Bank of Canada announcement. The right choice is not about predicting rates — it is about comparing the two honestly over your actual term, with your actual numbers, under a scenario you choose. This calculator does exactly that: it prices a fixed rate against a variable rate over your term, lets you say what you think variable rates will do, and tells you how far rates would have to rise before the variable advantage disappears.

What it answers, and what it doesn't

It answers: the monthly payment for each option, the total interest each costs you over the term, the balance remaining at renewal under each, and the break-even — how much variable rates would have to rise over the term before fixed becomes the cheaper choice.

It does not answer: where rates are going (that is a forecast, and this calculator refuses to make one — you supply the scenario), which option your lender will approve you for (qualification uses the higher of your contract rate plus 2% or the benchmark rate), or what happens after the term ends. It also does not model fixed-payment versus adjustable-payment variable products separately; it uses the standard Canadian convention where the variable payment stays fixed and the amortization absorbs rate moves.

Every input, explained

Mortgage amount. Enter the loan, not the price: price minus down payment, plus the insurance premium if your down payment is under 20%. The classic error is typing the purchase price and wondering why both payments look terrifying.

Amortization. The life of the full mortgage, typically 25 or 30 years. It sets the payment size for both options. A longer amortization shrinks both payments but grows the total interest either choice will cost you.

Term (years). The comparison window — usually 5 years, matching a standard term. The calculator compares total interest over this window only, because that is the period either rate is actually guaranteed or modelled.

Fixed rate. The fixed contract rate you are offered, as an annual figure. This number does not move for the whole term — that is the entire point of it.

Variable rate today. The current variable rate, usually prime minus a lender discount (for example, prime − 0.90%). This is the starting point of the variable scenario, not a promise.

Variable rate change over the term. Your scenario: how far you think the variable rate moves between now and the end of the term. Enter a positive number if you expect rises, a negative number if you expect cuts, zero if you want the flat baseline. The calculator moves the rate in a straight line from today's rate to today's rate plus this change, spread evenly across the term. The common error is leaving this at zero and treating the result as a prediction — zero is a scenario too, and usually not the one you believe.

How the math works

Canadian mortgages compound semi-annually, so the monthly rate is (1 + annual/2)^(2/12) − 1. The fixed side is a standard amortization at the fixed rate for the term: fixed payment, interest and principal split each month, balance carried to renewal.

The variable side starts at the payment computed from today's variable rate, then holds that payment constant — the standard practice at most Canadian lenders, where rate changes alter the interest/principal split and stretch or shrink the amortization rather than moving the payment. Each month's rate comes from the straight-line path between today's variable rate and today's rate plus your scenario change. Month by month, interest accrues at that month's rate, the fixed payment is applied, and the balance rolls forward.

The break-even is found by bisection: the calculator keeps raising the scenario change until the variable's total term interest exactly equals the fixed's, and reports that rise. If variable already loses at a zero change, there is no break-even to report — fixed wins outright.

Worked example: $500,000 mortgage, 4.79% fixed vs 4.45% variable, flat scenario

Take a $500,000 mortgage, 25-year amortization, 5-year term. Fixed at 4.79%, variable starting at 4.45% with no change over the term.

Fixed monthly payment: about $2,849
Variable starting payment: about $2,753 — roughly $95 less per month
Interest over 5 years, fixed: about $111,976
Interest over 5 years, variable: about $103,827
Variable saves about $8,149 in interest over the term, and the remaining balance is about $2,445 lower

The break-even: variable rates would have to rise roughly 0.66% over the term before the advantage disappears. Now change the scenario to +1.5% and watch the verdict flip — that is the whole exercise. The question was never "which rate is lower today." It is "how much room do I have before I regret it."

Provincial quirks and edge cases

The trigger rate is the variable borrower's tripwire. Because your payment stays fixed while the rate moves, a large enough rise means the payment no longer covers the monthly interest — the balance starts growing instead of shrinking. Every lender sets a trigger rate on your commitment; know yours before you sign, not after the letter arrives.

TD-style adjustable payments are the exception. Most lenders hold the variable payment constant, but a few adjust the payment when prime moves. If yours does, the payment comparison in this calculator understates how much your cash flow moves — ask your lender which product you actually have.

Quebec's rate display rules. Federally regulated lenders quote the semi-annual rate; confirm whether a broker's variable quote is prime minus the discount on the contract rate before entering it.

The discount is negotiable; prime is not. Your variable rate is prime minus a discount, and the discount is set at signing. Shopping lenders moves the discount; nothing you do moves prime. A "great variable rate" today is mostly a great discount.

Fixed penalties dwarf variable penalties. Breaking a fixed mortgage mid-term typically triggers the greater of three months' interest or an interest rate differential charge; variable penalties are usually just three months' interest. If there is any chance you sell or refinance before the term ends, price that asymmetry — it often matters more than a quarter-point of rate.

Questions to ask your mortgage broker or lender

Is my variable payment fixed or adjustable when prime moves — and what is my trigger rate in writing?
What is the exact discount off prime, and is it guaranteed for the full term?
If I break the fixed option in year three, walk me through the penalty calculation on my balance, not a sample one.
What fixed rate would you need to offer me today to make it cheaper than my variable scenario — and how close is your actual quote?

Frequently asked questions

Is variable always cheaper over time?

Historically, variable has won more often than not in Canada — but "usually" is not "always," and the wins cluster in falling-rate eras. The calculator's break-even line is more useful than history: it tells you exactly how wrong rates have to go before you regret the choice.

Why does the variable payment stay the same when the rate changes?

Because that is how most Canadian lenders structure it: the payment is fixed, and rate moves change how much of it is interest versus principal. Your amortization silently stretches when rates rise. It feels stable until you check the balance — or hit the trigger rate.

Should I just pick whichever payment is lower?

The starting payment is the least informative number on the page. Compare total interest over the term under a scenario you actually believe, check the break-even, and ask whether you could still pay comfortably if rates rose 2% on you. Affordability at the worst case beats optimism at the best case.

Does the stress test treat fixed and variable differently?

You qualify at the higher of your contract rate plus 2% or the benchmark rate either way. A lower variable contract rate can slightly lower the qualifying bar, but lenders apply the same buffer math to both.

Rules and rates as of September 2026. This is general information for Canadian home buyers and sellers, not financial, legal, or tax advice. Rules and rates change; confirm current figures with your lawyer or notary, your lender, or the government office that administers the tax before relying on them.