Consider a $500,000 mortgage. A 4.59% fixed rate costs about $107,180 in interest over five years. A variable rate starting at 4.95% costs about $106,585 if rates fall by a point, $115,818 if they stay put and $125,075 if they rise by a point. Enter your own rates to compare.
How the two differ
A fixed rate holds for the whole term, and so does the payment. A variable rate follows the lender’s prime rate. Depending on the market, variable rates can start lower or higher than fixed ones. They also carry a smaller penalty if you break the mortgage early.
What the calculator does
Five years of payments are run for each mortgage. The variable rate gets three test paths: rates that fall by one point over the term, rates that stay flat, and rates that rise by one point. Payments are recalculated every year on the remaining balance and amortization. A difference row then shows how much more or less the variable mortgage costs.
Reading the example
Here the variable mortgage starts higher than the fixed one, so it wins only if rates fall. Flat rates cost $8,638 more. A one point rise costs $17,895 more. Flip the setup so the variable rate starts below the fixed rate and the picture reverses. The calculator shows that too.
What the numbers leave out
Real variable rates rarely move in a straight line. Lenders also differ in how they handle payments when prime changes, and some keep the payment steady while the amortization shifts. Penalties are not in the comparison, and they are usually lower on variable mortgages. That matters if a sale or a move could come.
Choosing between them
Pick fixed if a payment change would strain your budget. Pick variable if you can absorb higher payments and want more flexibility. Some borrowers split the mortgage into a fixed part and a variable part. Your lender can tell you if that is offered.
The three paths are examples
Actual rates may move faster or follow another pattern entirely. The aim is to see how far apart the results can land. In this example the gap runs from a small saving to almost $18,000, which shows the risk a variable rate carries when it starts above the fixed one.
Questions for your lender
Ask if the payment changes with prime or stays fixed. Ask about the penalty, and about converting to a fixed rate. Ask about the trigger rate, the point where your payment no longer covers interest. Answers to these can matter more than a small difference in rate.
Trigger rates and negative amortization
Suppose your payment stays fixed while a variable rate climbs. Less of each payment then goes to principal. At the trigger rate the payment covers interest only, and above it the balance can grow. Find out if your lender works this way, and keep some cash ready for a lump sum if rates spike.
Where to go next
At the end of your term, the renewal calculator shows what a new rate does. The penalty calculator puts a price on leaving early. For the payment on any rate, use the mortgage payment calculator.
Frequently asked questions
Is fixed or variable better?
It depends on how rates move and how much payment risk you can take. The calculator compares three rate paths.
Which has the bigger penalty?
Fixed mortgages usually do, because of the interest rate differential.
Does my variable payment change when prime changes?
Depends on the lender. Some change the payment, others change the amortization.
Can I switch from variable to fixed?
Many lenders allow it, often without a penalty. Ask yours.
Does this include penalties?
No. It compares interest cost only.
Can I split my mortgage?
Some lenders offer a mortgage part fixed and part variable.
Sources and updates
Last reviewed: . Full disclaimer. How we build calculators. Editorial policy.
Estimate only. This calculator gives general information for planning. It is not tax, legal or financial advice, and it is not affiliated with the City of Toronto, MPAC or the Canada Revenue Agency. Results depend on the numbers you enter and may differ from official amounts. Check official sources or a qualified professional before you decide.