Two separate questions, often confused
Fixed and variable answer one question: is the interest rate set for the whole term, or does it move with the market? Open and closed answer a different one: can you pay the mortgage off, in whole or in part, without a charge, or does paying early cost something? A mortgage is described by both, for example a fixed closed term or a variable open term.
Most residential mortgages in Ontario are closed, because an open term usually carries a higher rate in exchange for that flexibility.
How a fixed rate behaves
A fixed rate stays the same for the whole term, so the payment is predictable regardless of what happens to market rates. The trade-off usually appears if you leave early: the charge for breaking a fixed term is calculated as the greater of three months' interest or an interest rate differential, a comparison between your rate and the lender's current rate for the time left on your term.
Ask the lender to show its own calculation; the formula is set in the mortgage contract, not by statute.
How a variable rate behaves
A variable rate moves with the lender's prime rate through the term. Some lenders keep the payment amount steady and let the portion going to principal shrink or grow instead; others adjust the payment itself as the rate changes. Breaking a variable term is usually, though not always, calculated as three months' interest only, without a differential.
Either way, the mortgage document sets out how the rate is calculated and disclosed; ask to see the disclosure statement, not just the rate on offer.
Blended payments and what the law requires of them
Most mortgages blend principal and interest into one payment. Under the federal Interest Act, a mortgage on a blended or similar plan is unenforceable for interest unless it discloses the principal amount and the yearly or half-yearly rate. That disclosure is what lets you, or a lawyer, work out how much of each payment reduces the balance.
An amortization schedule from the lender shows this breakdown over time and is worth asking for whichever type you choose.
Your steps
Who's involved
Explains the rate and term options available and discloses the early payout formula for each.
Reviews the mortgage document's disclosure of the rate and blended payment terms before registration.
Documents you will need
Tools for this stage
Six questions about certainty, timing and what an early exit would cost you. The result explains a mortgage type; it never points you to a lender or a rate.
CalculatorMortgage payment calculatorUse this to see a monthly, bi-weekly or accelerated payment for a given rate and amortization, with Canadian semi-annual compounding.
Questions people ask
Is a variable rate always cheaper to break than a fixed rate?
Usually, but not always. A variable term's charge is typically three months' interest, while a fixed term's charge is the greater of three months' interest or a differential, which can be far larger. Ask the lender to calculate both for your actual numbers.
Can I switch from variable to fixed partway through my term?
Many lenders allow this, sometimes without the usual early payout charge, though the new rate is whatever is offered on the day you convert. The right to convert, and its cost, comes from your mortgage contract, not from a general rule.
What does open actually let me do that closed does not?
An open mortgage can be paid off in full, or in large amounts, at any time without a charge. A closed mortgage restricts full payout and often limits extra lump-sum payments to a set amount each year set out in the contract.
Does the law cap how a lender calculates the differential?
Not directly. Financial regulators expect lenders to disclose how the differential is calculated and to make that information available on request, but the formula itself is set by the mortgage contract.
Why is my payment the same every month if the rate is variable?
Some lenders keep a variable mortgage's payment fixed and instead change how much of it goes to interest versus principal as rates move. If rates rise enough, the payment itself may eventually need to increase to keep the mortgage on track.
Also in this centre
Read more
Related centres
Other Learning Centres for the same transaction.
What happens between deciding to buy and settling into an Ontario home: budget and pre-approval, the search, the offer and its conditions, financing and inspection, closing day and the first year, with the legal layer explained at every step.
Related centreThe Selling a Home CentreEverything between deciding to sell an Ontario home and the money reaching your account: preparing, pricing, offers, the buyer's conditions, closing and tax, plus the situations that change the rules: tenants, estates and separation.
Sources
General information about Ontario law as of 5 September 2026, not legal advice. It does not create a lawyer–client relationship.
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