Locking in a Variable Rate Mortgage

David Sahibzada • October 18, 2022


If you have a variable rate mortgage and recent economic news has you thinking about locking into a fixed rate, here’s what you can expect will happen. You can expect to pay a higher interest rate over the remainder of your term, while you could end up paying a significantly higher mortgage penalty should you need to break your mortgage before the end of your term.


Now, each lender has a slightly different way that they handle the process of switching from a variable rate to a fixed rate. Still, it’s safe to say that regardless of which lender you’re with, you’ll end up paying more money in interest and potentially way more money down the line in mortgage penalties should you have to break your mortgage.


Interest rates on fixed rate mortgages


Fixed rate mortgages come with a higher interest rate than variable rate mortgages. If you’re a variable rate mortgage holder, this is one of the reasons you went variable in the first place; to secure the lower rate.


The perception is that fixed rates are somewhat “safe” while variable rates are “uncertain.”  And while it’s true that because the variable rate is tied to prime, it can increase (or decrease) within your term, there are controls in place to ensure that rates don’t take a roller coaster ride. The Bank of Canada has eight prescheduled rate announcements per year, where they rarely move more than 0.25% per announcement, making it impossible for your variable rate to double overnight.


Penalties on fixed rate mortgages


Each lender has a different way of calculating the cost to break a mortgage.  However, generally speaking, breaking a variable rate mortgage will cost roughly three months of interest or approximately 0.5% of the total mortgage balance. While breaking a fixed rate mortgage could cost upwards of 4% of the total mortgage balance should you need to break it early and you’re required to pay an interest rate differential penalty.


For example, on a $500k mortgage balance, the cost to break your variable rate would be roughly $2500, while the cost to break your fixed rate mortgage could be as high as $20,000, eight times more depending on the lender and how they calculate their interest rate differential penalty.


The flexibility of a variable rate mortgage vs the cost of breaking a fixed rate mortgage is likely another reason you went with a variable rate in the first place.


Breaking your mortgage contract


Did you know that almost 60% of Canadians will break their current mortgage at an average of 38 months? And while you might have the best intention of staying with your existing mortgage for the remainder of your term, sometimes life happens, you need to make a change.


Here’s is a list of potential reasons you might need to break your mortgage before the end of the term. Certainly worth reviewing before committing to a fixed rate mortgage. 


  • Sale of your property because of a job relocation.
  • Purchase of a new home.
  • Access equity from your home.
  • Refinance your home to pay off consumer debt.
  • Refinance your home to fund a new business.
  • Because you got married, you combine assets and want to live together in a new property.
  • Because you got divorced, you need to split up your assets and access the equity in your property
  • Because you or someone close to you got sick
  • Because you lost your job or because you got a new one
  • You want to remove someone from the title.
  • You want to pay off your mortgage before the maturity date.


Essentially, locking your variable rate mortgage into a fixed rate is choosing to voluntarily pay more interest to the lender while giving up some of the flexibility should you need to break your mortgage.


If you’d like to discuss this in greater detail, please connect anytime. It would be a pleasure to walk you through all your mortgage options and provide you with professional mortgage advice.

David Sahibzada

Senior Mortgage Advisor

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Is It the Right Time to Refinance? 5 Signs You Should Consider It

By David Sahibzada • February 28, 2025
Refinancing your mortgage can be a smart financial move, but how do you know if it’s the right time? Whether you’re looking to lower your monthly payments, access home equity, or consolidate debt, refinancing can offer valuable benefits. Here are five key signs that it might be the right time to refinance your mortgage in Canada. 1. Interest Rates Have Dropped One of the most common reasons Canadians refinance is to secure a lower interest rate. Even a small decrease in your mortgage rate can lead to significant savings over time. If rates have dropped since you took out your mortgage, refinancing could help you reduce your monthly payments and save thousands in interest. ✅ Tip: Check with your mortgage broker to compare your current rate with today’s market rates. 2. Your Financial Situation Has Improved If your credit score has increased or your income has stabilized since you first got your mortgage, you might qualify for better loan terms. Lenders offer lower rates and better conditions to borrowers with strong financial profiles. ✅ Tip: If you’ve paid off debts, improved your credit score, or increased your savings, refinancing could work in your favour. 3. You Want to Consolidate High-Interest Debt Carrying high-interest debt from credit cards, personal loans, or lines of credit? Refinancing can help consolidate those debts into your mortgage at a much lower interest rate. This can make monthly payments more manageable and reduce the overall cost of borrowing. ✅ Tip: Make sure the savings from refinancing outweigh any prepayment penalties or fees. 4. You Need to Free Up Cash for a Major Expense Many Canadians refinance to access their home’s equity for renovations, education costs, or major life expenses. With home values rising in many areas, a refinance could help you tap into that value while still keeping manageable payments. ✅ Tip: Consider a home equity line of credit (HELOC) if you need flexible access to funds. 5. Your Mortgage Term is Ending, and You Want Better Terms If your mortgage is up for renewal, it’s the perfect time to explore refinancing options. Instead of simply accepting your lender’s renewal offer, compare rates and terms to see if you can get a better deal elsewhere. ✅ Tip: A mortgage broker can help you shop around and negotiate better terms on your behalf. Is Refinancing Right for You? Refinancing isn’t always the best move—there can be penalties for breaking your current mortgage, and not all savings are worth the switch. However, if you relate to any of the five signs above, it’s worth discussing your options with a mortgage professional. Thinking about refinancing? Let’s chat and find the best option for you!

Fixed or Variable Mortgage? How Canada’s Economic Shifts Could Impact Your Decision

By David Sahibzada • February 24, 2025
Navigating Mortgage Rates in an Uncertain Market With Canada’s economy facing trade tensions, inflation concerns, and a potential slowdown, mortgage rates are in flux. Borrowers must weigh the risks and rewards of fixed vs. variable rates to make the best decision for their financial future. What’s Driving Mortgage Rate Changes? Several key factors are shaping the mortgage landscape: Trade Uncertainty – New tariffs between the U.S. and Canada could push inflation higher, impacting bond yields and fixed mortgage rates. Inflation Pressures – If inflation stays above the Bank of Canada’s 2% target, rate cuts may be delayed, keeping borrowing costs higher. Recession Concerns – If economic growth slows, the BoC could cut rates, making variable-rate mortgages more attractive. Fixed vs. Variable: Which One is Right for You? 🔒 Fixed-Rate Mortgages: ✅ Predictable payments for peace of mind ✅ Protection from future rate hikes ❌ Typically higher initial rates ❌ Costly penalties if you break your term early 📊 Variable-Rate Mortgages: ✅ Lower starting rates with potential for savings ✅ Easier to break or refinance if needed ❌ Payments can fluctuate with rate changes ❌ Higher risk if inflation pushes rates upward What’s the Best Move Right Now? ✔ Go Fixed if you want stability and protection from rising rates. ✔ Go Variable if you believe rates will drop and you can handle some risk. ✔ Consider a Hybrid Mortgage to get the best of both worlds. Stay Flexible & Informed Mortgage rates are unpredictable, and the best choice today may change in a few months. Working with a mortgage professional can help you navigate these shifts and secure the best deal for your financial future. Need expert guidance? Reach out today to discuss your options!
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