Fixed Rate vs. Variable Rate

Defining Fixed and Variable Rates

A fixed-rate mortgage is a type of mortgage with a fixed interest rate that remains the same throughout the entire term (not to be confused with amortization period (often longer)) of the loan. Fixed-rate mortgages offer the same payment amount per payment and are more easy to budget as they will not fluctuate throughout the entire term of the mortgage. This is a safer option for those without the means to pay increased payments.

A variable rate mortgage is a type of mortgage with an interest rate that is not fixed and will fluctuate, up or down, throughout the term of your mortgage (not to be confused with amortization period). This rate will fluctuate based on a lender’s benchmark interest rate such as the prime rate. Subsequently, payments will fluctuate throughout the term of the mortgage and will require an income or savings to meet increased payments.

Help you decide between fixed or variable rates

Mortgage rates rank are one of the highest factors of consideration among those looking to obtain financing. While obtaining a low rate is a key factor in the overall purchasing decision, many people are surprised to learn that there are differences when they are prompted with the decision to choose between fixed or variable and how the difference between the two can affect their mortgage. 

That’s where an expert like Shane comes in, to explain to his clients the best option based on their unique financial situation. While everyone seems to have an opinion on mortgage rates, it takes an expert to help guide you through the sometimes complex decision of choosing between a fixed rate of variable rate. While some clients prefer the consistency of a fixed rate, others choose variable for economic reward.

Fixed vs. Variable Rate

Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative financially. In many cases, young couples on their first mortgage with a large balance relative to their income may opt for a fixed rate mortgage as they would value the peace of mind that a consistent monthly payment that can be budgeted with accuracy brings.

Variable rate mortgages often allow borrowers to take advantage of lower rates – the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus or plus a set percentage. For example, if the current prime mortgage rate is 3.95 percent, the holder of a prime minus 0.5 percent mortgage would pay a 3.45 percent variable interest rate. This can be ideal for those with higher risk tolerance and the income or savings to support it.

Shane and his experienced team can help you make sense of both and compare how each may be of benefit to you, ensuring that you’re well informed when you make your decision.

Expert mortgage financing advice

Shane and his team are happy to provide expert mortgage financing advice in a judgment free environment with no-commitment required. This includes advising how a fixed or variable rate mortgage will affect your financial situation and goals.

Shane can complete your application entirely online or over the phone, as well as in person. Shane offers a variety of options to connect with you and works around your schedule, allowing you to indicate the best time and method for him to contact you.






Benefits of a FIXED-RATE Mortgage

Protection from Rising Interest Rates

A fixed-rate mortgage provides protection and a sense of security from rising interest rates as the prime lending rate has no effect on the amount of interest paid by those who are locked into a fixed-rate mortgage.

Consistent Regular Payment Amount

A fixed-rate mortgage payment will not fluctuate as a variable-rate mortgage payment might when prime lending rates rise above a set threshold. This allows you to confidently budget your payments each month.

Less Risk to Disposable Income & Budget

Variable-rate mortgage payments can sometimes rise when prime lending rates rise above a set threshold, meaning that your payments could increase unexpectedly. A fixed-rate payment will not.

Making sense of all the mortgage financing terms

Shane and his team are always here to help make your mortgage financing experience as stress-free and enjoyable as possible. Accessible from application to funding, Shane partners with you to help guide you through the process and make sense of the financing experience.

Benefits of a VARIABLE-RATE Mortgage

Historically Lower Interest Rates

Variable-rates are often lower than the rates offered by a fixed-rate mortgage but are subject to fluctuation, depending on the prime lending rate, which is influenced by the economy and many other complex factors.

Possible Lower Mortgage Payments

As variable-rates can be lower than fixed-rates, mortgage payments can sometimes be lower than those with a fixed-rate mortgage, meaning you could save monthly on each regular payment made.

Significant Possible Savings

As rates fall, a variable-rate mortgage may put more of your payment toward the principle of your mortgage and less toward lender interest. This could save you additional money over the lifetime of the mortgage.

Shane and his team are ready help you choose

After applying, Shane and his team are happy to help you understand the difference between a fixed and variable rate mortgage and how each of these options will affect your mortgage and which could be most beneficial to your current financial situation and long-term goals.

The decision to choose a fixed or variable rate is not always an easy one. It should depend on your tolerance for risk as well as the ability of your income and savings to withstand increases in mortgage payments. I’m always here to help clarify each of these options and to make personalized recommendations based on how to best benefit you with a comprehensive understanding of your unique financial situation and goals.

― Shane Osmond, Mortgage Professional