What is the difference between a fixed and variable rate mortgage for a first-time buyer?

With a fixed-rate mortgage, your interest rate stays the same for the entire term (commonly 1 to 5 years in Canada), so your payments are predictable and do not change when interest rates move. This makes budgeting straightforward and protects you from rate increases during the term.

With a variable-rate mortgage, your rate moves up or down with the lender's prime rate, which tracks the Bank of Canada's policy rate. In some variable-rate products, your payment amount stays the same but the portion applied to principal versus interest fluctuates. In others, the payment itself changes. If rates rise significantly, your cost increases; if rates fall, you pay less.

Historically, variable rates have on average been lower than fixed rates over the long run, but this is not guaranteed, and the benefit depends heavily on the rate environment during your term. As a first-time buyer, the certainty of a fixed rate may provide comfort while you adjust to homeownership costs; a mortgage broker can walk you through current rate spreads. This is a financial planning question — a lawyer handles the legal side of your mortgage, while a broker or financial adviser helps with the rate decision.