What are the Differences Between Fixed-rate and Variable Mortgages?

Couple looking at new home

When the time comes to get a mortgage, you will be faced with the decision to choose between a variable rate mortgage or a fixed rate mortgage. There are some key differences between the two, and understanding them will help you choose the type of mortgage that works best for you.

Fixed Rate Mortgage

With a fixed rate mortgage, your payment will stay constant for the term of the mortgage. Usually fixed rate mortgages come with a higher interest rate, but the stability of the payment for the length of the mortgage term is appealing for many people.

Variable Rate Mortgage

Variable rate mortgages tend to offer a lower interest rate than fixed rate mortgages, but the interest rate does fluctuate with the prime lending rate, meaning that your mortgage payment can increase if interest rates increase.

At Cambrian, our variable rate mortgage is open, meaning you can choose to switch to a Cambrian fixed rate mortgage at any time, without penalty.

When deciding which type of mortgage to go with, we suggest assessing your comfort level with interest rate fluctuations. Going with a variable rate mortgage can often save you money on interest, but if you won’t be able to sleep at night worrying if your mortgage payment may change, then a fixed rate mortgage may be a better option. Also, if your budget will not allow for an increase in mortgage payments, fixed rate is the safer option.

First time home buyers often will decide to go with a fixed rate mortgage because they don’t want to take the chance that their mortgage payment will increase during the term of their mortgage.

Learn more about Cambrian mortgages.