In short
The fixed-variable choice is not decided by the rate: on $400,000, a quarter point is worth ~$59/mo — but the exit penalty can range from $5,000 (variable, three months' interest) to $18,000 (fixed, IRD) in the same scenario. The rule: uncertain horizon → variable or short term; maxed-out budget → fixed; in between → 2-3-year terms or hybrid. And always check which variable: adjustable payments, or fixed payments with a trigger rate.
The rate gap: what it is really worth in dollars
Let's start by deflating the rate obsession. On a $400,000 loan amortized over 25 years, every quarter point is worth about $59 a month. A half-point fixed-variable gap: around $118 a month — real, but rarely the amount that should decide a choice that binds you for years. The calculator below quantifies the exact gap between the two offers you are given.
Why has variable historically often started lower? Because you accept the risk the lender refuses to carry: if the policy rate rises, your cost follows. Fixed sells you insurance — and insurance has a price. So the real question is not "which is cheaper today?", but "who, you or the lender, carries the risk — and at what price?".
Interactive tool
Fixed vs variable: your two offers, compared in 20 seconds
Enter the amount and the two rates you are offered: the calculator returns both payments and the gap, per month and per year.
Constant-rate comparison, for guidance: a variable can rise or fall during the term — that is precisely the risk being traded. It does not replace contract analysis (penalty, variable family, privileges).
The real difference: the penalty — and the payment that moves (or not)
This trade-off's best-kept secret is not in the rate: it is in the exit clause. Breaking a variable mortgage generally costs three months' interest — about $5,000 on our example. Breaking a fixed exposes you to the IRD, which can reach $18,000 in the same scenario — the full math is here. And life moves: a sale, a separation, a job transfer, a refinance… If your horizon is uncertain, the variable's flexibility is a value in itself, independent of the rate.
Second little-known nuance: there are two families of variable. With adjustable payments, your payment moves with the policy rate — transparent, but bumpy. With fixed payments, the payment does not move, but the interest share grows as rates rise — up to the trigger rate, where the payment no longer covers the interest and must be adjusted. Many owners learned this the hard way in 2022-2023: always ask which variable you are being offered.
How to choose: horizon first, rate second
Your horizon is uncertain (possible sale, job transfer, a move within 2-3 years) → variable, or a short-term fixed: the gentle penalty is worth more than the rate insurance. Your budget is maxed out (payment close to the ceiling of your capacity) → fixed: a hike you cannot absorb is not a risk, it is a threat. You have cushion and nerve → variable holds up, provided you accept not checking the policy rate every week. You are torn → 2-3-year terms and hybrid loans (half fixed, half variable) exist precisely for that.
And a useful reminder: this choice replays at every renewal. Nothing is permanent — fixed today can become variable in three years, when your horizon has changed. It is a personal trade-off rate comparators do not make: a good broker does.
Frequently asked questions
Fixed or variable rate: which to choose in 2026?
There is no universal answer — there is your horizon and your risk tolerance. Uncertain horizon (possible sale or transfer): variable or a short term, for its gentle penalty. Tight budget: fixed, for stability. Cushion and nerve: variable holds up. Short terms and hybrid loans are the compromises.
What is the real difference between fixed and variable?
Beyond the rate: the exit penalty. Breaking a variable generally costs three months' interest (~$5,000 on $400,000); breaking a fixed exposes you to the IRD, which can be several times higher ($18,000 in our example). If your life may move during the term, that clause is often worth more than the rate gap.
What is the trigger rate?
On a FIXED-PAYMENT variable, the payment does not move when rates rise — the interest share grows instead. The trigger rate is the threshold where your payment no longer covers the interest: the lender must then adjust it. Always ask which family of variable you are offered: adjustable payments or fixed payments.
How much is a rate gap worth in dollars?
On $400,000 amortized over 25 years, every quarter point is worth about $59 a month; half a point, about $118. Use this page's calculator to quantify the exact gap between your two offers — then compare it to the cost of the wrong penalty.
No market rate is quoted on this page — they change weekly. The mechanisms (penalties, trigger, hybrids) do not go stale: confirm how they apply to your contract with a licensed professional.
Go further
The trade-off is made on your life, not on a comparator
Horizon, budget, penalty clause, variable family: a good broker weighs all four before talking rates. Payotte verifies only one per sector, on facts.
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