Fixed Vs. Variable Calculator

Fixed Vs. Variable Calculator

This calculator was designed to help you decide whether to go with a fixed or variable mortgage rate. First, enter your mortgage amount and the fixed and variable rates you're considering. Next, adjust the Variable Rate Increase (Annual) to see how much rates would have to rise during the term before you would be better off going with a fixed rate.

Mortgage Amount
$
5 Year Fixed Rate
%
5 Year Variable Rate
%
Annual Variable Increase
%

Important: this calculator assumes you are making monthly payments equal to the fixed payments, over a 5 year term, and using a 25 year amortization.

Should YOU choose a fixed or variable mortgage rate?

The debate rages on as borrowers attempt to decide which one makes the most sense. Ultimately, it depends on your borrowing profile and the prevailing market conditions, but here are some considerations below.

Fixed Rate Mortgage

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A fixed mortgage rate doesn’t change throughout the term, which offers you the peace of mind in knowing that your payment will stay the same.

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You’ll pay the greater of 3 months interest or the interest rate differential (IRD) when you discharge the mortgage.

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If you sell your property, you can port the mortgage to a new property within 30-120 days without penalty.

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If you need to borrow additional money against your property, you can avoid a penalty by blending the rate.

Variable Rate Mortgage

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A variable mortgage rate fluctuates with the prime rate, which implies that your payments can go up or down during the term.

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You’ll only ever pay 3 months’ interest to break a variable rate mortgage, which is both nominal and predictable.

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The rate itself is typically not portable, but you can avoid the penalty by staying with the same lender.

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If you need to borrow money against your property, you may be able to get your penalty waived by staying with your lender.

Next Steps

Typically, interest rates are higher on a fixed rate mortgage compared to the variable rate option, but this is not always the case. It’s the spread between the two that will help you decide which one will perform better over the term.

Historically, variable rates have outperformed fixed rates; however, you need to evaluate both options before proceeding. It will come down to your risk profile, circumstances and market conditions at the time.

The key advantage of variable rates, in our humble opinion, is the penalty predictability in the event that you need to break your mortgage. We take comfort in knowing that it will only cost you 3 months interest, which is nominal.

Get in touch with us and we’ll help YOU make the right choice!

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