Fixed Rate Mortgages in Canada: Pros, Cons & What Every Home Buyer Needs to Know
- erin0582
- Oct 2
- 2 min read
When it comes to buying a home in Canada, one of the first financial decisions you’ll face is choosing between a fixed rate mortgage and a variable rate mortgage. For many Canadians, the fixed rate feels like the safest choice — but is it really the best fit for everyone?
In this blog, I’m breaking down what a fixed rate mortgage means, the advantages it offers, and the often-overlooked downside that could cost you thousands.
🔹 What is a Fixed Rate Mortgage?
A fixed rate mortgage is simple to understand: the interest rate you secure at the time of approval remains the same throughout the term of your mortgage.
Whether you choose a 1-year, 3-year, or 5-year fixed term, your rate is locked in, meaning your monthly payments stay consistent. This predictability makes it easier for homeowners to budget and plan without worrying about market fluctuations.
Example:If your mortgage is approved at 5.5% for a 5-year term, that rate (and your monthly payment) will not change during the term, regardless of whether interest rates rise or fall.
🔹 Benefits of a Fixed Rate Mortgage
Many home buyers are drawn to fixed rate mortgages because of the stability they provide.
Predictable Payments: Your monthly mortgage payment never changes.
Budgeting Made Easy: Great for homeowners who want financial certainty.
Peace of Mind: If interest rates increase, your rate and payment are unaffected.
Best for Conservative Borrowers: Ideal if you want consistency over flexibility.
For families and first-time buyers especially, the security of knowing exactly what you’ll owe each month can bring a lot of relief.
🔹 The Downside: Mortgage Penalties
While fixed rates sound appealing, there’s one major drawback many people don’t realize: the penalty for breaking your mortgage early.
Breaking a mortgage means refinancing, selling your home, or paying off your loan before the term ends. With fixed rates — especially the popular 5-year fixed — penalties can be extremely high.
💡 For example:
$500,000 mortgage
Break your mortgage halfway through the term
Penalty from a major bank: $20,000–$25,000 (based on 4.5%–5% of your remaining balance)
This is why it’s critical to think about your long-term plans before locking into a fixed rate.
🔹 Is a Fixed Rate Right for You?
A fixed rate mortgage is best if you:✔ Plan to stay in your home for the full term✔ Prefer stability and peace of mind✔ Want protection against rising interest rates
It may not be ideal if you:❌ Anticipate moving in a few years❌ Might refinance or pay off early❌ Want more flexibility
🔹 Final Thoughts
Fixed rate mortgages in Canada are popular because of their stability, but it’s important to understand both sides. While you gain predictable payments, the penalties for breaking a fixed mortgage can be steep.
If you’re not sure whether a fixed or variable rate mortgage is right for you, consult with a mortgage broker who can assess your goals, risk tolerance, and lifestyle.
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Erin Price Emery
Contact me: erin@priceemery.com
Call or text: 604-767-7725
Explore homes for sale in Vancouver and other areas at listitvancouver.com
