What is a Fixed Rate Mortgage?
A fixed rate mortgage is a home loan where the interest rate remains constant for the entire term of your mortgage. This means your mortgage payments stay the same amount every month, making it easier to budget and plan for the future.
When you lock in a fixed rate, you're protected from interest rate increases during your term. Even if the Bank of Canada raises rates, your mortgage rate and payments won't change until your term expires and it's time to renew.
Key Benefit:
Fixed rate mortgages offer stability and predictability, making them ideal for homeowners who prefer knowing exactly what their payments will be and want protection from rising interest rates.
Current Fixed Rate Ranges
Sample rate ranges by term length (rates vary by lender and qualification)
Disclaimer: Rates are approximate and for illustration purposes only. Actual rates vary based on credit score, property value, down payment amount, lender, and market conditions. Contact us for personalized rate quotes.
Key Benefits of Fixed Rate Mortgages
Know exactly what your mortgage payment will be every month, making budgeting simple and stress-free.
Plan your finances with confidence, knowing your housing costs won't change during your term.
Shield yourself from interest rate increases. Your rate stays locked in regardless of market changes.
Sleep better knowing your mortgage rate can't increase, even if the economy becomes unstable.
Make long-term financial plans with certainty about your mortgage obligations.
Avoid unexpected payment increases that can strain your budget during the term.
Fixed Rate Terms Explained
Pros:
- Lower interest rates typically
- More frequent renewal opportunities
- Lower penalties for breaking
Cons:
- More frequent renewals required
- Risk of higher rates at renewal
Who it's for:
Those expecting income increases, planning to move soon, or betting on declining rates.
Pros:
- Balance of rate and security
- Long enough for stability
- Competitive rates offered
Cons:
- Higher penalties than short-term
- May miss out on rate drops
Who it's for:
Most homeowners seeking a good balance between rate, stability, and flexibility.
Pros:
- Maximum payment stability
- Protection from long-term increases
- Less frequent renewals
Cons:
- Higher interest rates
- Highest break penalties
- Less flexibility
Who it's for:
Risk-averse homeowners who value peace of mind and expect rates to rise significantly.
Who Should Choose Fixed Rate Mortgages?
New to homeownership? Fixed rates provide predictable payments while you learn to manage your budget as a homeowner.
If you prefer certainty and don't want to worry about payment fluctuations, fixed rates offer peace of mind.
Lock in today's rate if you believe interest rates will rise in the near future.
If your budget has little room for payment increases, fixed rates ensure your payments stay manageable.
Planning to stay in your home for many years? Fixed rates provide stability for the long haul.
Fixed Rate vs Variable Rate Comparison
| Feature | Fixed Rate | Variable Rate |
|---|---|---|
| Rate Stability | Rate locked for entire term | Fluctuates with prime rate |
| Payment Predictability | Same payment every month | Payments can change monthly |
| Penalty for Breaking | Higher (3 months interest or IRD) | Lower (typically 3 months interest) |
| Rate Savings Potential | Limited if rates drop | Can benefit from rate decreases |
| Budget Planning | Easy - payments never change | Challenging - payments fluctuate |
| Market Risk | Protected from rate increases | Exposed to rate increases |
How Fixed Rate Mortgages Work
Rate is Locked In
When you sign your mortgage contract, your interest rate is locked in for the duration of your term. This rate won't change regardless of what happens in the market.
Term Selection
You choose a term length (1-10 years). The term is the period during which your rate is guaranteed. Most Canadians choose a 5-year term for the best balance.
Payment Calculation
Your monthly payment is calculated based on your mortgage amount, interest rate, and amortization period. This payment stays exactly the same throughout your term.
Renewal Process
At the end of your term, you'll need to renew your mortgage. You can negotiate a new rate, switch lenders, or change your mortgage type at this point without penalty.
Breaking Your Fixed Rate Mortgage
Interest Rate Differential (IRD)
The IRD is calculated based on the difference between your original rate and the current rate for a similar term. This is often the higher of the two penalty calculations and can be substantial.
Three Months Interest
The lender may charge you three months worth of interest payments on your outstanding mortgage balance. This is typically the minimum penalty.
Important: Your lender will charge whichever penalty is higher - the IRD or three months interest. This can range from a few thousand to tens of thousands of dollars.
- Rates have dropped significantly and you can save more than the penalty cost
- You're selling your home and moving
- Refinancing to consolidate high-interest debt
- Your financial situation has changed dramatically
- Port your mortgage to a new property
- Make lump sum prepayments if allowed
- Wait until renewal to make changes
- Blend and extend your current mortgage
Fixed Rate Mortgage Calculator
Monthly Payment
$2,223.33
This is an estimate. Actual payments may vary based on your specific situation, lender fees, and insurance requirements.
Tips for Getting the Best Fixed Rate
A higher credit score can qualify you for better rates. Pay down debts, pay bills on time, and check your credit report for errors before applying.
A larger down payment (20% or more) can help you qualify for better rates and avoid CMHC insurance premiums.
Don't accept the first offer. Compare rates from multiple lenders including banks, credit unions, and mortgage brokers.
Rate holds typically last 90-120 days. Apply when you're ready to buy and rates are favorable, but lock in before they rise.
Look at the whole package - prepayment privileges, portability options, and penalty structures matter as much as the rate.
While 5-year terms are popular, shorter terms often have lower rates if you can handle the renewal frequency.
Pre-approval shows sellers you're serious and locks in your rate for 90-120 days, protecting you from rate increases while you shop.
Brokers have access to multiple lenders and can often negotiate better rates than you'd get on your own, at no cost to you.