Your mortgage renewal letter arrives and suddenly everyone has an opinion — your bank, your neighbour, that podcast you half-listened to on the commute. The truth is, there's no universal right answer between fixed and variable. What matters is which option fits your situation, your cash flow, and your ability to sleep at night. Here's how I'd encourage you to think it through.
Understand What You're Actually Choosing Between
A fixed-rate mortgage locks your interest rate — and therefore your payment — for the term you select. You know exactly what you're paying every month, full stop. A variable-rate mortgage moves with your lender's prime rate, which follows the Bank of Canada's policy rate. Your payment may stay the same but the portion going to interest versus principal shifts, or your payment changes outright depending on the product. Neither is inherently safer or smarter — they just behave differently.
Ask Yourself the Honest Questions
Before you even look at rate quotes, answer these:
- How tight is my monthly budget? If a payment increase of a few hundred dollars would genuinely stress your household finances, predictability has real value. Fixed may be worth paying a small premium for.
- How long am I likely to stay in this home? If there's a real chance you sell or refinance before the term ends, understand the prepayment penalty structure for each option. Variable penalties are typically simpler to calculate than fixed-rate IRD penalties, which can be surprisingly large.
- What's the rate spread right now? If variable is priced significantly below fixed, you have more buffer before rate increases eat that advantage. If the spread is narrow, the math case for variable weakens. Ask your mortgage professional to model both scenarios honestly.
- What's your gut? This sounds unscientific, but it's real. If you'll be checking the Bank of Canada rate announcement every six weeks with anxiety, that stress has a cost too.
The Penalty Conversation Nobody Has Early Enough
One of the most overlooked factors at renewal is what happens if your plans change mid-term. Fixed-rate penalties — particularly with major banks — can run into the tens of thousands of dollars depending on how rates have moved. Variable penalties are typically three months' interest. This isn't a reason to automatically choose variable, but it's a number you should know before you sign anything.
Don't Negotiate Only With Your Current Lender
Your renewal offer from your existing lender is rarely their best offer. You have real negotiating power at renewal, and switching lenders — even if you ultimately don't — can sharpen the conversation significantly. A licensed mortgage broker can shop multiple lenders simultaneously and often access rates or products your bank won't proactively offer you.
What I'd Suggest Before You Decide
Sit down with a licensed mortgage professional — ideally a broker who isn't tied to one lender — and ask them to model both options with real numbers based on your balance, amortization remaining, and term choices. Ask specifically about penalties, prepayment privileges, and what happens in a rising or falling rate environment. This isn't a decision to make on a phone call with your bank's renewal department in ten minutes.
My job as your real estate broker is to make sure the property decision and the financing decision work together. If you're approaching renewal and also wondering whether it's the right time to move, upsize, or downsize in the West GTA market, let's have that conversation. The more complete the picture, the better the decision.
This article is general information, not financial, legal, or tax advice. Nouman Khalil, Broker, RE/MAX Realty Specialists Inc.