Mortgages Resource Centre

Fixed Rate vs. Variable Rate Mortgages

When choosing a mortgage, one of the key decisions you'll face is the type of rate to get – specifically fixed rate or variable rate. As with most of the decisions that come with purchasing a home, there are pros and cons to each option. Understanding the differences can help you make an informed decision that aligns with your financial goals.

Fixed rate mortgage

A fixed rate mortgage offers a set interest rate and monthly payments for the chosen term of the loan. This type of mortgage is ideal for borrowers who prefer stability and predictability in their financial planning. Often this includes buyers who plan to stay in their home for a longer period and want to avoid the risk of rising interest rates.

For instance, a family who is looking for a steady, straightforward repayment plan for their mortgage might choose a fixed rate, which allows them to budget accurately for their monthly expenses without worrying about interest rate fluctuations.

Variable-rate mortgage

A variable rate mortgage has an interest rate that can increase or decrease over time depending on fluctuations to the lender's prime rate: a base rate set by Canadian financial institutions. Borrowers might choose a variable rate mortgage if they expect interest rates to remain stable or decrease, but are comfortable with potential changes to their interest rate.

How to choose between a fixed rate and variable rate mortgage

When deciding between a fixed rate and variable rate, speak with your mortgage advisor and discuss your short and long-term plans. Also consider the following factors:

Economic trends

Understand current and projected interest rate trends to make an informed decision

Risk tolerance and financial stability

Assess your comfort level with potential changes to the interest rate on your mortgage. Consider your ability to handle payment fluctuations. For example, if your career path includes an expectation of moving from lower income to higher, an increase in interest rates down the line might fit into your budget without creating stress.

Switching between fixed and variable rates

Switching the type of rate you have on your mortgage - fixed or variable - is possible but you should consider various factors, depending on the terms of your mortgage, before making that decision:

Fees

Gain an understanding of any fees or additional costs associated with breaking your current mortgage term and conditions

Market conditions

Consider the current and projected interest rate environment.

Financial goals

Align your new mortgage type with your financial goals, as it's important to consider the big picture when comparing mortgage options over time. Once you've considered the options, it can be helpful to consult with an advisor for to discuss your specific financial situation.

Fixed vs. Variable rate mortgages with CIBC

CIBC offers a range of fixed and variable rate mortgage options to suit different needs. Our fixed rate mortgages provide stability with consistent monthly payments. Learn more about CIBC Fixed Rate Mortgages. Our variable rate mortgages offer flexibility. Learn more about CIBC Variable Rate Mortgages.

By understanding the differences and considering your personal financial situation, you can choose the mortgage that best fits your needs.

Take advantage of our expert advice and great rates. Whether you’re buying your first home, making a new purchase, or looking to switch your mortgage, we can help. For personalized advice, consider speaking with a CIBC advisor.

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