On a $500,000 mortgage over 25 years, a 4.59% fixed rate costs $107,180 in interest across five years. A 4.95% variable rate costs $115,818 if rates hold still, or $8,638 more. Enter your two quotes and see how the gap moves.
What does the tool actually compare?
You give it a five year fixed rate and today’s variable rate. The fixed loan runs at one rate for all five years. Variable runs three ways: rates drifting lower, staying put, or drifting higher, with the payment recalculated at the start of each year so the amortization stays on track.
The rate moves 0.2 points a year, so by year five it sits 0.8 points from where it began (the scenario labels round that up to one point). For each path you get the interest paid and the difference from the fixed loan. A positive difference means variable costs more.
How do the three paths compare?
These are the default numbers, with a fixed rate of 4.59% and a variable rate of 4.95%.
| If rates | Variable interest | Against fixed |
|---|---|---|
| Fall | $106,585 | -$595 |
| Stay where they are | $115,818 | +$8,638 |
| Rise | $125,075 | +$17,895 |
What does a real comparison look like?
Take a $500,000 loan, 25 years of amortization, a fixed rate of 4.59% and a variable rate of 4.95%.
The fixed loan pays $107,180 in interest and leaves a balance of $439,633 after five years. Variable starts 0.36 points higher, so it needs a falling rate just to break even, and even then it saves only $595. That’s thin. If rates hold, you pay $8,638 more, and if they climb you pay $17,895 more, which is a big enough swing that you should ask if your budget could take the higher payment year after year.
Now drop the variable rate to 4.25% and the picture flips. If rates stay put, interest is $99,043, which is $8,136 below the fixed loan. Even the rising path stays close, at $1,062 above. And when both rates sit at 4.59%, the flat path shows no difference at all, while the fall and rise paths swing about $9,200 each way.
Is the cheaper rate always the better choice?
The cheaper rate isn’t always the better choice. The Financial Consumer Agency of Canada describes the usual trade-off like this:
A fixed interest rate stays the same for the entire term. It’s usually higher than a variable interest rate for a similar term.
Choosing a mortgage that is right for you, canada.ca
So the lower sticker price on a variable rate buys you uncertainty. In the default case here it’s the other way round, with variable priced above fixed, and then the only reason to pick it is a bet that rates will fall. If a payment that can’t move matters to you, that is a fair reason to pay a few bucks more over the term.
Another wrinkle: some variable mortgages keep your payment steady while the rate floats. The FCAC page on choosing a mortgage warns that when rates rise, more of each payment goes to interest, and the amount you owe can grow. Ask your lender which kind you’re being offered, because this tool recalculates the payment each year and doesn’t show that effect.
What does the comparison leave out?
It covers five years of interest, not the whole mortgage, so don’t read it as a total cost. Penalties aren’t in there. If you might break the mortgage early, and plenty of people do before the term is up, estimate the cost with the mortgage penalty calculator. It also recalculates the variable payment every year, and your lender may set payments differently.
The three paths illustrate what could happen. Nobody knows where rates are going, and that includes us. So pick a mortgage whose payment you could carry in the worst path, and leave some slack in your budget for it. To see what a higher payment would do to that budget when the term ends, try the mortgage renewal calculator. For a full payment schedule on either loan, open the mortgage amortization calculator, and for a single rate use the mortgage calculator.
What this page is based on
The maths uses the rates you enter, semi-annual compounding and monthly payments. The Interest Act requires mortgage interest to be calculated yearly or half-yearly, not in advance. The rate paths are set inside the calculator, not taken from any forecast. This site has no tie to any government body, and the results are estimates.
About this calculator
- What it does
- Compare the interest cost of fixed and variable mortgages under three rate paths.
- Category
- Mortgage
- Last checked
- September 30, 2026
- Result type
- Estimate for information only, not tax advice.
Frequently asked questions
Which is cheaper, a fixed or a variable mortgage?
It depends on where rates go, and nobody knows that in advance. With the calculator's default numbers (4.59% fixed, 4.95% variable, $500,000 over 25 years), variable costs $8,638 more in interest over five years if rates stay flat and $595 less if they fall.
Where do the three rate paths come from?
They are built into the calculator and do not come from any forecast. The variable rate moves 0.2 points a year, down, flat or up, over the five years, and the payment is recalculated at the start of each year so the amortization stays on track.
Does the fixed vs variable comparison include penalties?
No, it compares interest only. The cost of breaking a mortgage early can be large and depends on the lender and the rate type. Use the mortgage penalty calculator to estimate what leaving either type before the term ends would cost.
Are the three rate paths a forecast?
No. They show what could happen if rates drift down, stay put or climb. Pick a mortgage whose payment you could still carry on the rising path, and leave some slack in your budget for it.
How far ahead does the comparison look?
Five years, the length of a typical term. For the fixed loan you also see the balance left after those five years, which is $439,633 on the default example. Interest after year five is outside the comparison.
What is a variable mortgage with a fixed payment?
Your payment stays the same while the rate floats. The Financial Consumer Agency of Canada warns that when rates rise, more of each payment goes to interest, and you can end up owing more than you expected. Ask your lender which version you are being offered.
Sources and updates
Updated: . How we check rates · Editorial team · Updates