When applying for a mortgage, the borrower has the option to proceed with either a variable-rate or fixed-rate mortgage. In a variable-rate mortgage, the interest rate will fluctuate with the lender’s prime interest rate. An institutional lender will generally have their own prime interest rate that may be similar to Canada’s prime interest rate. In a variable rate mortgage application, the lender will quote the borrower an interest rate of prime +/- a set percentage. Variable-rate mortgages typically have slightly lower interest rates than fixed-rate mortgages, however, when the lender’s prime interest rate is very high, a variable-rate mortgage can have higher interest rates than a fixed-rate mortgage.


In fixed-rate mortgages, the interest rate will be a locked-in flat rate for the entire mortgage term. When the mortgage term expires the borrower can renew the mortgage at the lender’s current fixed interest rate. One advantage of fixed-rate mortgages is that the interest rate is locked in. This means that if the lender’s prime interest rate becomes very high, it will not impact the interest rate of the borrower’s mortgage. If you are planning on getting a new mortgage, you should conduct thorough research to determine whether a variable-rate or fixed-rate mortgage will be more cost-effective in your specific situation. An experienced mortgage broker or financial advisor can help you determine what type of mortgage may be right for you.

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Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please [contact us].

About the Author:

Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.