Fixed vs. Variable Rate Calculator

What the Fixed vs. Variable Calculator does

This calculator answers the perennial Canadian mortgage question honestly: instead of guessing where rates are headed, it runs your numbers across five rate scenarios — falling one point, falling half a point, holding, rising half a point, and rising a full point — and shows the total interest each product would cost under every one of them. No single scenario is presented as the likely one.

It also surfaces two things most comparisons skip entirely. The trigger rate is the level at which a fixed-payment variable mortgage stops covering its own interest, which is exactly what caught a large number of Canadian variable-rate holders off guard in 2022 and 2023. And the penalty asymmetry between the two products — usually much smaller to break a variable — has real financial value if there is any chance you move, refinance, or sell before your term ends.

• A five-scenario grid of total interest, fixed vs variable, over your term
• The trigger rate for a fixed-payment variable mortgage, and how far above it you sit today
• The break-even rate movement — how far rates would need to rise for fixed to actually win
• The estimated penalty on each product, and the dollar value of variable's smaller penalty
• A payment volatility view of your mortgage balance across scenarios

The key variables that move the answer — and how lenders treat them

Four things decide which product actually wins in your situation, and none of them is "what rates will do," because nobody — including your lender — actually knows that in advance.

• Term length — a longer term gives variable more time for rate movements to compound in either direction, which is why the scenario grid is calculated specifically over your chosen term, not a generic horizon.
• Variable payment type — adjustable variables recalculate your payment every time prime moves, keeping your amortization on schedule automatically. Fixed-payment variables hold your payment constant instead, which feels stable until rates rise far enough that the payment can no longer cover the interest — the trigger rate.
• Likelihood of breaking mid-term — lenders price the two products' penalties very differently. Variable-rate penalties are almost always three months' interest, full stop. Fixed-rate penalties use the greater of three months' interest or an interest rate differential, which can run into the tens of thousands of dollars on a large balance with years left in the term.
• Lender type — a big bank's posted-rate method for calculating a fixed-rate IRD is usually the largest penalty a borrower will encounter, because it compares your rate against the lender's full posted rate rather than the rate you would actually be offered today. Monolines and most credit unions use a smaller standard-method calculation instead.

How this is actually calculated

The fixed path is deterministic: a constant rate, compounded semi-annually as required by the Interest Act, produces a level payment and a predictable balance at any point in the term. The variable path is simulated month by month at monthly compounding, applying each scenario's rate change on a straight-line ramp over the first 12 months of the term and holding from there — a simple, transparent path rather than a forecast dressed up as one.

For an adjustable variable, the payment is recalculated every month to keep the mortgage fully amortizing over the remaining schedule at the current rate. For a fixed-payment variable, the payment never changes; only the split between interest and principal does, which is what allows negative amortization to occur if rates rise enough. The trigger rate is solved directly: it is the rate at which the initial payment exactly equals the interest on the starting balance — trigger rate = initial payment × 12 ÷ principal.

The break-even rate movement is found by bisection, searching for the rate change at which the variable path's total interest over the term equals the fixed path's. The penalty comparison uses the same interest rate differential methodology as our dedicated penalty and break-vs-stay calculators, evaluated at the midpoint of your term for both products.

• Fixed: i = (1 + r ÷ 2)^(2 ÷ 12) − 1, constant payment, deterministic interest
• Variable: i = (1 + r ÷ 12) − 1 each month, recalculated payment (adjustable) or fixed payment (fixed-payment variable)
• Trigger rate = initial monthly payment × 12 ÷ starting principal
• Break-even: bisection on the rate delta where variable total interest = fixed total interest over the term

What you get, and how lenders use these numbers to qualify you

Qualification treats fixed and variable almost identically at the front door — both are stress-tested at the greater of your contract rate plus two points or the 5.25% benchmark — but the products diverge sharply after you sign, in exactly the ways this calculator measures.

• Five-scenario grid — the honest presentation of the fixed-vs-variable trade-off, letting you supply your own view on rates instead of trusting someone else's forecast.
• Trigger rate — a number every fixed-payment variable holder should know before signing, not after prime has already moved against them.
• Break-even rate movement — turns "will rates rise enough to matter" into a concrete, checkable threshold you can watch against actual Bank of Canada decisions.
• Penalty asymmetry — a hidden factor in the decision that has nothing to do with the rate itself, and is often decisive if your circumstances could plausibly change within the term.

Using your results well

Look at all five scenarios together, not just the one you think is most likely — the grid exists precisely so the decision does not hinge on a single guess about the future. Pay particular attention to the trigger rate if you are considering a fixed-payment variable product, since that is the one genuinely asymmetric risk in this comparison: fixed and adjustable-variable payments simply move with the payment schedule, but a fixed-payment variable can quietly stop paying down principal at all.

What this calculator deliberately does not do is predict where rates are going. It also does not model a mid-term conversion from variable to fixed, which most lenders allow at their then-current rates and which is a real option worth asking about if a variable mortgage starts to feel uncomfortable partway through a term.

• Read every scenario in the grid, not just the one you expect to happen
• If considering a fixed-payment variable, compare your buffer above the trigger rate against realistic near-term rate paths
• Weigh the penalty asymmetry seriously if there is any real chance you move or refinance mid-term
• Ask about mid-term conversion terms before assuming a variable rate locks you in for the whole term

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