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- Where
- Home price$
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Fixed or variable?
Variable rates follow the Bank of Canada (prime); fixed rates follow bond yields. The key question: how much would variable rates have to rise before fixed wins? Here's the 5-year math.
Over 5 years
Variable saves about $5,667 in interest
- Fixed: 5-year interest$122,551
- Variable: 5-year interestVariable rate around 5.65% after 5 years$116,884
- Break-even increaseIf variable rises this much a year on average (about 6.15% after 5 years) they cost the same; more than that and fixed wins+0.35% / yr
- Fixed: monthly payment now$2,974
- Variable: monthly payment nowPayments change with the rate (some banks keep payments fixed and change the principal paid)$2,740
Variable: you can handle payment swings and don't expect big hikes. Fixed: you want stable payments and fear more hikes. Breaking a variable usually costs only 3 months' interest, so it's more flexible.
Estimate: variable changes linearly at your assumed average; real changes come in steps at Bank of Canada decisions. Excludes penalties and fees.