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Mortgages explained
Fixed against variable, how to treat a renewal as a decision rather than a formality, and what refinancing actually does. No rates quoted here: those change weekly, so ask us for today's.
Fixed or variable?
When choosing a mortgage, one of the biggest decisions is whether to take a fixed or a variable rate. Both have genuine advantages, and the right answer depends on your financial goals and how comfortable you are with uncertainty rather than on which is cheaper today.
With a fixed-rate mortgage your interest rate stays the same for the whole term. Payments are predictable, budgeting is easier, and you are protected if rates rise. It suits people who value stability and would rather not think about it again for five years.
With a variable-rate mortgage your rate moves with the lender's prime rate. It often starts lower, you benefit if rates fall, and some variable products are more flexible. In exchange, your payments or interest costs may rise, and it is less predictable. It suits people who can absorb a change in payment without stress.
Comparing the two
Fixed rate
Stable payments. Easier budgeting. Protection from rising rates. Best for buyers who prefer certainty and peace of mind.
Variable rate
Potential for lower borrowing costs. You benefit when rates fall. Greater flexibility in some products. Best for buyers comfortable with some fluctuation.
Four questions that usually settle it
Rather than trying to predict the market, answer these honestly. They point to the right choice more reliably than a forecast does.
- Do I prefer stability, or flexibility?
- Could I handle higher payments if rates increased?
- How long do I actually plan to keep this mortgage?
- What are my broader financial goals over that period?
Every situation is different. Sukhpreet can compare the options against your own numbers and tell you what the difference would mean in practice.
Your mortgage renewal is a decision, not a formality
When your mortgage term ends you must renew it for a new term and a new interest rate. This is the moment to review whether the mortgage still fits your life, and it is worth treating as a real decision.
Do not automatically accept your lender's first offer. Exploring your options could save you a meaningful amount over the next term, and asking costs nothing.
What to weigh before you renew
Before signing anything, consider:
- Your current interest rate, and how the renewal offer compares to what else is available
- Any change in your income or financial situation since you last signed
- Upcoming life events, such as moving, renovating or a growing family
- Whether a fixed or a variable rate now suits you better than it did before
Start reviewing about three to six months before renewal. That gives you time to compare properly instead of deciding under a deadline.
What you may be able to do at renewal
- Negotiate a better rate with your current lender
- Switch lenders for a more competitive offer
- Change your mortgage term
- Adjust your payment amount
- Pay down additional principal
Refinancing explained
Refinancing means replacing your current mortgage with a new one, usually to access better terms, lower your payments, or use the equity you have built in your home.
Home equity is the difference between what your home is worth and what you still owe. If a home is worth $800,000 and the mortgage balance is $500,000, there is $300,000 of equity, a portion of which may be available through refinancing.
Why homeowners refinance
Access equity
To fund renovations or another major expense, using value that already exists in the home.
Consolidate debt
To bring higher-interest debt into one lower-rate payment that is easier to manage.
Lower the payment
To reduce monthly costs, or to secure a better interest rate than the current mortgage carries.
Change strategy
To restructure the mortgage around financial goals that have shifted since it was arranged.
What to check before refinancing
Refinancing is not free, and whether it makes sense depends on the arithmetic in your specific case. Review:
- The interest rate you would move to
- Any penalty for breaking your existing mortgage
- Legal and appraisal costs
- Your home's current value and your outstanding balance
- How the total cost compares with the benefit, over the time you plan to stay
That last point is the one that decides it. A refinance that pays for itself over seven years is a poor idea if you are moving in two.
Put numbers to it
This page explains how the options differ. These two work out what they would mean for your own mortgage.
Want this applied to your own numbers?
Sukhpreet can compare your options against your actual situation, including a complimentary renewal review.
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