Fixed vs Variable at Mortgage Renewal: Questions to Ask

Short answer: Choose fixed if a payment increase of a few hundred dollars a month would stress your budget or you plan to stay put for the whole term. Choose variable, or a shorter fixed term, if you might move or refinance soon (the penalty is usually about three months’ interest instead of the interest rate differential) and your budget can handle changes. Base it on your plans and comfort with risk, not rate headlines.

Quick Refresher

Fixed: the rate is locked for the term, the payment stays the same, and you’re protected from increases.

Variable: prime plus or minus a set amount. The payment or the interest and principal split can change. Penalties to break are usually simpler and smaller.

Question 1: How Much Payment Change Can I Handle?

If your payment rose $100 to $300 a month, how would that feel? If it makes you uneasy, fixed may be better. If your budget can absorb it, variable could work.

Question 2: How Long Will I Keep This Mortgage?

Fixed rate penalties (IRD) can be very large. If you might move, refinance or face a big life change, variable or a shorter fixed term may suit you.

Question 3: Stability or Flexibility?

Stability (fixed): predictable payments, staying in the home, set it and forget it.

Flexibility (variable or shorter fixed): freedom to move or restructure without a big penalty, comfortable watching rates.

Question 4: What About the Stress Test?

Staying with your lender: no stress test. Switching lenders with the same balance and amortization: since November 2024, no stress test for insured or uninsured mortgages. Refinancing, borrowing more or extending amortization: the stress test still applies.

Question 5: How Will I Feel If Rates Move?

If you’d worry constantly, fixed reduces stress. If you’re comfortable with uncertainty, variable could work.

Question 6: Is There a Middle Ground?

• A shorter fixed term (two or three years)
• A fixed rate with a higher payment to build a buffer and pay off faster

Don’t try to time the market. Pick a strategy that works across scenarios.

Question 7: What Do the Numbers Say?

We model both: rate, payment, total interest, prepayment impact and penalty if broken early, plus “what if rates rise” scenarios for variable.

Typical Profiles

• Stability seeker: usually a three to five year fixed.
• Flexibility focused: variable or a shorter fixed term.
• Balanced: a shorter fixed term, then review in two or three years.

How We Help

We review your renewal offer, run real scenarios for both options and talk through your plans and penalties. Send us your renewal letter or book a call.

This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed and powered by Mortgage Connection Inc.