A fixed-rate mortgage is straightforward – your interest rate is established at the onset of your term (typically for 5 years, which is the most common duration), and your payments remain unchanged until the renewal period.
Although fixed rates are commonly higher than variable ones (although not always), they offer stability in both interest costs and payments throughout the term. Despite accruing more interest over time, opting for a fixed rate is deemed a safer choice, ensuring a predictable budget over your mortgage term.
A variable rate mortgage means that your interest rate will fluctuate in tandem with changes in the prime rate, consequently impacting your interest expenses and mortgage payments.
Typically provided for a 5-year term, variable rates are frequently (although not always) lower than 5-year fixed rates (inclusive of lender discounts off prime) due to the potential for fluctuations and the accompanying need for budget adjustments, thus adding an element of risk.