Our Ottawa mortgage broker team knows how important it is to find the best mortgage rates possible. Often, first-time homebuyers find it confusing when it comes to fixed and variable-rate mortgages, and which option is best for them. Both have their advantages and disadvantages and it’s important that you know what each one means in order to decide if it’s the right rate for your situation.

Variable Rate Ottawa Mortgage

A variable-rate or adjustable-rate mortgage has long been seen as the riskier of the two. You get a lower rate of interest for a fixed time, for example, 5 years. This means that the low rate is locked in for that time period, regardless of what the market does. However, once that period is over, your rate will rise or fall with the market. If the rates are higher, you could find that your rate shoots up quite a bit, raising your monthly mortgage repayments. This can be bad if you have a strict budget.

There is also the chance that, when the fixed period ends, rates are lower and you get the lower rate. If you have some leeway in your budget and can cover the ups and downs of rate changes, this can be a good option for you. It’s also a good choice if you will be moving or selling the home before the fixed period ends.

You can get a variable-rate mortgage in two options.

  • Closed variable-rate mortgages

The closed variable-rate option fixes the rate for the entirety of the mortgage. You may have some limitations regarding the prepayment option with this option so be sure to ask your mortgage broker about any penalties for lump-sum payments, how often you can make them, and for how much.

  • Open variable rate mortgages

The open variable-rate option allows you to make extra payments or pay off your mortgage early while incurring no penalties. Your payments are fixed for the entirety of the term of the mortgage. Homebuyers opt for this option when they are able to make a downpayment of 20% or more, will be selling in the near future, or whose cash flow changes.


Fixed-Rate Ottawa Mortgage

Having a fixed-rate offers more control with your budget and is seen as a safer option for many. The rates you get are usually a bit higher than you would get with a variable-rate, however, your payments will stay the same, with no surprises. This is because the rate is fixed, meaning it won’t change for the life of the mortgage. This is great if rates rise, but there is also a chance that rates will drop lower than your fixed-rate and you’ll end up stuck with that higher rate.

You have 3 options with a fixed-rate mortgage:

  • Open fixed-rate mortgage

The open fixed-rate option allows you to make prepayments or pay the mortgage in full early while not being penalized. It also gives you the option to amend the mortgages’ term time for added flexibility, also without penalization.

  • Closed fixed-rate mortgage

The closed fixed-rate option can often get you a lower rate in comparison to the open fixed-rate option, however, there may be limitations around making prepayments.

  • Convertible fixed-rate mortgage

The convertible fixed-rate option allows you to switch between an open to a closed term mortgage without penalties, but it must be done within a specified timeframe. It’s a good choice if you are looking to keep your options open, just be sure to find out about the prepayment limitations.


If you would like more information regarding mortgage rates, give our Ottawa mortgage broker team a call today!