Fixed vs Variable: Which Saves You More?
Compare both options side by side — then see what happens if rates go up, down, or stay the same over your term.
Fixed or variable — it's the question almost every Alberta mortgage client asks. Fixed gives you certainty: the same payment for your entire term regardless of what the Bank of Canada does. Variable moves with prime rate — historically lower, but with exposure to rate increases. The right answer depends on your financial situation, risk tolerance, and where rates are headed.
This calculator runs both scenarios side by side. You can model different rate movement assumptions — flat, rising, or falling — to see how each option performs over your term. It's the analysis your bank won't do for you, because they'd rather you just pick one and sign.
📊 The fixed vs. variable decision has real dollar consequences.
25 years of Alberta market data informs the advice. Get Shawn's read on current conditions →
Rate projections are illustrative only. Past Bank of Canada rate movements do not guarantee future behaviour. This calculator uses Canadian semi-annual compounding as required by federal mortgage regulations.
Updated July 2026
What This Calculator Shows You
Three things, in plain dollars, on your actual mortgage amount:
- Fixed against variable, side by side. One rate that never moves, one that does. Same mortgage, same amortization, same term, so you are comparing apples to apples.
- What happens if rates move. Use the simulator to push the variable rate up, pull it down, or leave it flat, and watch what each one does to your payment and your total cost over the term. That is the whole ball game, and most people have never actually seen the numbers.
- Which one wins in each case. Not in theory. On your mortgage, at the term you pick.
Now here is the part the calculator cannot show you, and it is the part that costs people the most money.
If you break the mortgage early, what does it cost to get out? Sell the house, move, refinance, separate, get transferred, pay it out with an inheritance. Life happens partway through a term all the time. A fixed mortgage and a variable mortgage charge you very different penalties to leave, and the gap between them is often bigger than the rate difference you are sitting here comparing.
So run your numbers above. Then read the next few sections, because that is where the real decision gets made.
Fixed vs Variable: How It Actually Works in Alberta
A fixed rate locks your interest rate for your whole term. Your payment does not move. Rates go up, you do not care. Rates come down, you do not benefit. You bought certainty, and certainty has a price.
A variable rate moves with your lender's prime rate, which follows the Bank of Canada. When the Bank moves, your rate moves. Depending on your lender, either your payment changes, or your payment stays the same and the split between principal and interest shifts. Those are two very different products and most people do not know which one they signed.
One thing worth understanding: a variable rate is almost never quoted at prime. It is quoted as a discount off prime, and that discount is the whole point. The size of it varies a lot by lender and by what the market is doing at the time, and it moves around. When people talk about variable outperforming fixed, they are talking about a heavily discounted variable, not a variable sitting at prime. Getting the deepest discount available is a big part of the job, and it is exactly the kind of thing a broker shops across lenders for you.
Ask that question before you sign. "If prime goes up, does my payment change, or does my amortization stretch?" A good broker answers that in one sentence.
Where we sit right now: the Bank of Canada held its overnight rate at 2.25% on July 15, 2026. That is the sixth hold in a row. The next scheduled decisions are September 2, October 28, and December 9, 2026.
What that means in plain language: the emergency is over, and the Bank is watching. It is not slashing, and it is not hiking. Anyone who tells you they know which way it breaks next is guessing with a confident voice.
What Most People Get Wrong
They compare the rate, not the penalty. This is the big one. If you break a fixed mortgage early, most lenders charge you the greater of three months interest or the interest rate differential. That IRD calculation can run into five figures. Break a variable mortgage and you are usually looking at three months interest, full stop. If there is any chance you sell, refinance, or restructure mid term, that gap can be worth more than the rate difference ever was.
Now the important caveat, and this is where people get hurt. Everything above is an illustration, not a formula. Every lender calculates the penalty differently. Some use posted rates rather than your actual rate. Some factor the original discount you received back into the calculation, so the deeper the discount they gave you at the start, the bigger the penalty for leaving early. Two lenders, same rate, same balance, same day, and the penalty can differ by thousands.
So do not take a number off any website, including this one, as your penalty. Ask the lender for the actual calculation on your actual mortgage. If they will not put it in writing, that tells you something.
They forget you have to qualify at a higher rate anyway. Under the stress test you qualify at the greater of your contract rate plus 2%, or 5.25%. So the rate you sign is not the rate you qualify at. That surprises people every week.
They pick based on a prediction. Choosing variable because you think rates will fall is a bet. Choosing variable because your budget can absorb a jump and you want the flexibility is a strategy. One of those is a plan. The other is a hope.
They ignore their own life. Are you staying five years? Might you sell in two? Is there a separation, a business sale, an inheritance, a move coming? The right answer changes completely depending on what happens to you, not what happens to rates.
A Real Scenario
The situation. A couple near High River, renewing. Their bank offered a five year fixed and told them it was the safe choice. They were leaning that way because it sounded responsible.
The problem. Nobody at the bank asked them the one question that mattered. One of them was two or three years from retiring, and they were already talking about downsizing off the acreage. A five year fixed would have put them in the exact spot where breaking the mortgage triggers an IRD penalty.
What we did. We looked at the exit, not the rate. We compared the penalty language across lenders, looked at a shorter term and at a variable with a three month interest penalty, and priced out what each would cost them if they sold in year two or three.
The outcome. They picked the option that let them leave cheaply, not the one with the lowest number on the page.
The lesson. If there is a chance you will not finish the term, the penalty clause matters more than the rate. Read that part before you sign anything.
Frequently Asked Questions
Q: Is variable always cheaper than fixed over the long run?
Not automatically, and this is where a lot of bad advice gets handed out. The number everybody quotes comes from a 2001 study by Professor Moshe Milevsky at York University, which looked at Canadian data from 1950 to 2000 and found variable beat the five year fixed somewhere in the range of 70 to 90 percent of the time.
Here is the part most people leave out. Milevsky has said himself that his research does not mean variable will win in any particular five year stretch, and his forward looking simulations put the odds closer to 65 percent. He put it plainly: the future is random. Then 2022 and 2023 came along and hammered variable holders, which is exactly the scenario he was warning about.
Two more things that matter. That research compares a discounted variable against fixed, so the discount you actually get changes the math. And an average is no comfort if you are the one covering a bigger payment. History is useful context. It is not a forecast, and anybody selling it to you as one is overselling.
Q: Can I switch from variable to fixed later?
Most variable mortgages let you convert to a fixed rate during the term without a penalty. Two catches people do not expect. First, you convert at whatever fixed rates are on that day, not at the rate you saw when you signed. Second, you are usually not locking into a fresh five year term. You are locking in for the time left on your current term. Three years into a five year variable means you are looking at a two year fixed, and a two year rate is not the same as a five year rate. Ask your lender exactly how their conversion works before you sign, because it is not identical across lenders.
Q: What happens to my payment if prime goes up?
It depends on which type of variable you have. On some, the payment rises right away. On others, the payment stays the same and more of it goes to interest, which stretches your amortization. Ask your lender which one you have. It matters.
Q: Which is better for a first-time buyer in Alberta?
Usually fixed, and not because of the math. It is because a first purchase already has enough moving parts. A payment that does not change while you learn what owning actually costs is worth something. If your budget has room and you understand the risk, variable can still make sense.
Q: Does the stress test apply to both?
Yes. You qualify at the greater of your contract rate plus 2%, or 5.25%, on both fixed and variable.
Q: What if I might sell in the next couple of years?
Then the penalty structure should drive your decision, not the rate. Look hard at variable or a shorter term. The IRD penalty on a broken fixed mortgage has cost people more than they ever saved on the rate.
So What Do You Actually Do?
The number the calculator gave you is an estimate built on an assumption about rates. What a lender actually offers you depends on your credit, your income, the property, your amortization, and which lender we go to. Those five things move the answer more than the fixed-versus-variable debate does.
Look, I am going to be honest with you. This is not a decision you should make off a website, including mine. It takes about fifteen minutes on the phone to figure out which one fits your situation, and there is no cost to ask.
Ready to run your numbers properly?
Call or text 403-703-6847. To get a real answer fast, have these ready: your most recent mortgage statement, your renewal letter if you have one, and a rough idea of how long you plan to stay in the home.
Shawn Selanders is a RECA-licensed mortgage broker with Mortgage Architects, serving High River, Okotoks, Calgary, Foothills County and Southern Alberta since 1999.