Fixed Rate

A Fixed rate mortgage is a type of mortgage where you have a fixed interest rate and therefore a "fixed" payment amount. This means that your interest rate is not subject to change and the rate at which you pay back your loan is always the same.

A Fixed mortgage product will also be "open" or "closed". In either case your loan will have a set term. It will likely be between 6 months and 7 or even 10 years. If your term is “open” then you can payout the amount in full at anytime without penalty or further interest charges. If, however, your term is “closed” then you will be subject to an early payout penalty or interest differential charge.

Variable / Adjustable

An adjustable rate mortgage (ARM) or variable rate mortgage is a mortgage where the interest rate is subject to change. Most of these products are based on a formula using the prime interest rate less a factor. For example, if you choose an ARM with a rate of prime - 0.5% then your rate would be calculated at any given time using this formula. For example if prime were 6% then the interest rate on your mortgage would be 5.5%.

These types of products have been very popular until recently as prime interest has begun to climb. There is also an option with this type of mortgage to lock in or convert to a 3 year or 5 year "fixed" term at any time although at a marginally higher rate.