Fixed vs. Variable Mortgage Rates in Canada

Rabinder Dhillon • November 26, 2025

Fixed vs. Variable Rate Mortgages: Which One Fits Your Life?

Whether you’re buying your first home, refinancing your current mortgage, or approaching renewal, one big decision stands in your way: fixed or variable rate? It’s a question many homeowners wrestle with—and the right answer depends on your goals, lifestyle, and risk tolerance.


Let’s break down the key differences so you can move forward with confidence.


Fixed Rate: Stability & Predictability

A fixed-rate mortgage offers one major advantage: peace of mind. Your interest rate stays the same for the entire term—usually five years—regardless of what happens in the broader economy.

Pros:

  • Your monthly payment never changes during the term.
  • Ideal if you value budgeting certainty.
  • Shields you from rate increases.

Cons:

  • Fixed rates are usually higher than variable rates at the outset.
  • Penalties for breaking your mortgage early can be steep, thanks to something called the Interest Rate Differential (IRD)—a complex and often costly formula used by lenders.

In fact, IRD penalties have been known to reach up to 4.5% of your mortgage balance in some cases. That’s a lot to pay if you need to move, refinance, or restructure your mortgage before the end of your term.


Variable Rate: Flexibility & Potential Savings

With a variable-rate mortgage, your interest rate moves with the market—specifically, it adjusts based on changes to the lender’s prime rate.


For example, if your mortgage is set at Prime minus 0.50% and prime is 6.00%, your rate would be 5.50%. If prime increases or decreases, your mortgage rate will change too.

Pros:

  • Typically starts out lower than a fixed rate.
  • Penalties are simpler and smaller—usually just three months’ interest (often 2–2.5 mortgage payments).
  • Historically, many Canadians have paid less overall interest with a variable mortgage.

Cons:

  • Your payment could increase if rates rise.
  • Not ideal if rate fluctuations keep you up at night.


The Penalty Factor: Why It Matters More Than You Think

One of the biggest surprises for homeowners is the cost of breaking a mortgage early—something nearly 6 out of 10 Canadians do before their term ends.

  • Fixed Rate = Unpredictable, potentially high penalty (IRD)
  • Variable Rate = Predictable, usually lower penalty (3 months’ interest)


Even if you don’t plan to break your mortgage, life happens—career changes, family needs, or new opportunities could shift your path.


So, Which One is Best?

There’s no one-size-fits-all answer. A fixed rate might be perfect for someone who wants stable budgeting and plans to stay put for years. A variable rate might work better for someone who’s financially flexible and open to market changes—or who may need to exit their mortgage early.

Ultimately, the best mortgage is the one that fits your goals and your reality—not just what the bank recommends.


Let's Find the Right Fit

Choosing between fixed and variable isn’t just about numbers—it’s about understanding your needs, your future plans, and how much financial flexibility you want.


Let’s sit down and walk through your options together. I’ll help you make an informed, confident choice—no guesswork required.


RABINDER
MORTGAGE BROKER

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Parental Leave

By Rabinder Dhillon • November 19, 2025
Chances are if the title of this article piqued your interest enough to get you here, your family is probably growing. Congratulations! If you’ve thought now is the time to find a new property to accommodate your growing family, but you’re unsure how your parental leave will impact your ability to get a mortgage, you’ve come to the right place! Here’s how it works. When you work with an independent mortgage professional, it won’t be a problem to qualify your income on a mortgage application while on parental leave, as long as you have documentation proving that you have guaranteed employment when you return to work. A word of caution, if you walk into your local bank to look for a mortgage and you disclose that you’re currently collecting parental leave, there’s a chance they’ll only allow you to use that income to qualify. This reduction in income isn’t ideal because at 55% of your previous income up to $595/week, you won’t be eligible to borrow as much, limiting your options. The advantage of working with an independent mortgage professional is choice. You have a choice between lenders and mortgage products, including lenders who use 100% of your return-to-work income. To qualify, you’ll need an employment letter from your current employer that states the following: Your employer’s name preferably on the company letterhead Your position Your initial start date to ensure you’ve passed any probationary period Your scheduled return to work date Your guaranteed salary For a lender to feel confident about your ability to cover your mortgage payments, they want to see that you have a position waiting for you once your parental leave is over. You might also be required to provide a history of your income for the past couple of years, but that is typical of mortgage financing. Whether you intend to return to work after your parental leave is over or not, once the mortgage is in place, what you decide to do is entirely up to you. Mortgage qualification requires only that you have a position waiting for you. If you have any questions about this or anything else mortgage-related, please connect anytime. It would be a pleasure to work with you.

New to Credit? Let’s Build a Solid Foundation

By Rabinder Dhillon • November 12, 2025
Starting from Scratch: How to Build Credit the Smart Way If you're just beginning your personal finance journey and wondering how to build credit from the ground up, you're not alone. Many people find themselves stuck in the classic credit paradox: you need credit to build a credit history, but you can’t get credit without already having one. So, how do you break in? Let’s walk through the basics—step by step. Credit Building Isn’t Instant—Start Now First, understand this: building good credit is a marathon, not a sprint. For those planning to apply for a mortgage in the future, lenders typically want to see at least two active credit accounts (credit cards, personal loans, or lines of credit), each with a limit of $2,500 or more , and reporting positively for at least two years . If that sounds like a lot—it is. But everyone has to start somewhere, and the best time to begin is now. Step 1: Start with a Secured Credit Card When you're new to credit, traditional lenders often say “no” simply because there’s nothing in your file. That’s where a secured credit card comes in. Here’s how it works: You provide a deposit—say, $1,000—and that becomes your credit limit. Use the card for everyday purchases (groceries, phone bill, streaming services). Pay the balance off in full each month. Your activity is reported to the credit bureaus, and after a few months of on-time payments, you begin to establish a credit score. ✅ Pro tip: Before you apply, ask if the lender reports to both Equifax and TransUnion . If they don’t, your credit-building efforts won’t be reflected where it counts. Step 2: Move Toward an Unsecured Trade Line Once you’ve got a few months of solid payment history, you can apply for an unsecured credit card or a small personal loan. A car loan could also serve as a second trade line. Again, make sure the account reports to both credit bureaus, and always pay on time. At this point, your focus should be consistency and patience. Avoid maxing out your credit, and keep your utilization under 30% of your available limit. What If You Need a Mortgage Before Your Credit Is Ready? If homeownership is on the horizon but your credit history isn’t quite there yet, don’t panic. You still have a few options. One path is to apply with a co-signer —someone with strong credit and income who is willing to share the responsibility. The mortgage will be based on their credit profile, but your name will also be on the loan, helping you build a record of mortgage payments. Ideally, when the term is up and your credit has matured, you can refinance and qualify on your own. Start with a Plan—Stick to It Building credit may take a couple of years, but it all starts with a plan—and the right guidance. Whether you're figuring out your first steps or getting mortgage-ready, we’re here to help. Need advice on credit, mortgage options, or how to get started? Let’s talk.