What You Can Expect When Locking in a Variable Rate

Diane Buchanan • August 30, 2018

If you have a variable rate mortgage, and recent economic news has you thinking about locking into a fixed rate, here is what you can expect will happen.

Firstly, your lender will be very happy as they will now make considerably more money off you. Not only will your interest rate increase, but the cost of breaking your mortgage will increase as well.

Now, each lender has a different way of handling this process, but it’s very safe to say that regardless of which lender you are with, you will end up paying more money in interest, and potentially way more money if you have to break your mortgage.

Higher Rates

Fixed rates are always higher than variable rates. If you’re a variable rate mortgage holder, this is most likely the reason you went variable in the first place. The perception is that fixed rates are somewhat “safe” while variable rates are “uncertain”. It is true, as the variable rate is tied to prime, it can increase (or decrease) within your term. However, there are controls in place in Canada to ensure that rates don’t take a roller coaster ride. As the Bank of Canada has scheduled rate announcements, 8 times per year, and they rarely move more than 0.25% per move, it’s impossible for your variable rate to double overnight.

Increased Penalty

Obviously each lender has a different way of calculating the cost to break a mortgage, with the Big Banks being absolutely the worst, but a general rule of thumb is that breaking a variable rate mortgage will cost roughly 3 months interest or roughly 0.5% of the total mortgage balance, while breaking a 5 year fixed rate mortgage will roughly cost 4% of the total mortgage balance. So on a $500k mortgage balance, the cost to break your variable rate would be roughly $2500, while the cost to break your fixed rate mortgage could be as high as $20,000, eight times more.

Reasons People Break Mortgages

Did you know that 6 out of 10 Canadians will break their current mortgage at an average of 38 months? As we’ve discussed, locking in your variable rate to a fixed rate will increase the cost of breaking your mortgage. Despite our best intentions, sometimes life happens, and we need flexibility.

So here is a list of potential reasons you might need to break your mortgage.

  • Sale of your home (you have to move).
  • Purchase of a new home.
  • Access equity from your home.
  • Refinance your home to pay off consumer debt.
  • Refinance your home to fund a new business.
  • Because you got married (you combine assets and want to live together in a new home)
  • Because you got divorced. (you need to split up your assets and access the equity in your home)
  • Because you (or someone close to you) got sick.
  • Because you lost your job or because you got a new one.
  • Because you got relocated for work.
  • You want to remove someone from the title.
  • You want to pay off your mortgage before the maturity date.

Essentially, locking your variable rate mortgage into a fixed rate is voluntarily paying more interest to the bank, while giving up some of the flexibility to break your mortgage.

If you would like to discuss your personal financial situation, regardless if you have a mortgage or not, I’d love to talk with you. Please contact me anytime!

DIANE BUCHANAN
 Mortgage Broker

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How Payment Frequency Impacts Mortgage Financing

By Diane Buchanan • October 15, 2025
You’ve most likely heard that there are two certainties in life; death and taxes. Well, as it relates to your mortgage, the single certainty is that you will pay back what you borrow, plus interest. With that said, the frequency of how often you make payments to the lender is somewhat up to you! The following looks at the different types of payment frequencies and how they impact your mortgage. Here are the six payment frequency types Monthly payments – 12 payments per year Semi-Monthly payments – 24 payments per year Bi-weekly payments – 26 payments per year Weekly payments – 52 payments per year Accelerated bi-weekly payments – 26 payments per year Accelerated weekly payments – 52 payments per year Options one through four are straightforward and designed to match your payment frequency with your employer. So if you get paid monthly, it makes sense to arrange your mortgage payments to come out a few days after payday. If you get paid every second Friday, it might make sense to have your mortgage payments match your payday. However, options five and six have that word accelerated before the payment frequency. Accelerated bi-weekly and accelerated weekly payments accelerate how fast you pay down your mortgage. Choosing the accelerated option allows you to lower your overall cost of borrowing on autopilot. Here’s how it works. With the accelerated bi-weekly payment frequency, you make 26 payments in the year. Instead of dividing the total annual payment by 26 payments, you divide the total yearly payment by 24 payments as if you set the payments as semi-monthly. Then you make 26 payments on the bi-weekly frequency at the higher amount. So let’s use a $1000 payment as the example: Monthly payments formula: $1000/1 with 12 payments per year. A payment of $1000 is made once per month for a total of $12,000 paid per year. Semi-monthly formula: $1000/2 with 24 payments per year. A payment of $500 is paid twice per month for a total of $12,000 paid per year. Bi-weekly formula: $1000 x 12 / 26 with 26 payments per year. A payment of $461.54 is made every second week for a total of $12,000 paid per year. Accelerated bi-weekly formula: $1000/2 with 26 payments per year. A payment of $500 is made every second week for a total of $13,000 paid per year. You see, by making the accelerated bi-weekly payments, it’s like you end up making two extra payments each year. By making a higher payment amount, you reduce your mortgage principal, which saves interest on the entire life of your mortgage. The payments for accelerated weekly payments work the same way. It’s just that you’d be making 52 payments a year instead of 26. By choosing an accelerated option for your payment frequency, you lower the overall cost of borrowing by making small extra payments as part of your regular payment schedule. Now, exactly how much you’ll save over the life of your mortgage is hard to nail down. Calculations are hard to do because of the many variables; mortgages come with different amortization periods and terms with varying interest rates along the way. However, an accelerated bi-weekly payment schedule could reduce your amortization by up to three years if maintained throughout the life of your mortgage. If you’d like to look at some of the numbers as they relate to you and your mortgage, please don’t hesitate to connect anytime; it would be a pleasure to work with you.

Start Smart: Get Pre-Approved for Your Mortgage

By Diane Buchanan • October 8, 2025
Thinking of Buying a Home? Here’s Why Getting Pre-Approved Is Key If you’re ready to buy a home but aren’t sure where to begin, the answer is simple: start with a pre-approval. It’s one of the most important first steps in your home-buying journey—and here's why. Why a Pre-Approval is Crucial Imagine walking into a restaurant, hungry and excited to order, but unsure if your credit card will cover the bill. It’s the same situation with buying a home. You can browse listings online all day, but until you know how much you can afford, you’re just window shopping. Getting pre-approved for a mortgage is like finding out the price range you can comfortably shop within before you start looking at homes with a real estate agent. It sets you up for success and saves you from wasting time on properties that might be out of reach. What Exactly is a Pre-Approval? A pre-approval isn’t a guarantee. It’s not a promise that a lender will give you a mortgage no matter what happens with your finances. It’s more like a preview of your financial health, giving you a clear idea of how much you can borrow, based on the information you provide at the time. Think of it as a roadmap. After going through the pre-approval process, you’ll have a much clearer picture of what you can afford and what you need to do to make the final approval process smoother. What Happens During the Pre-Approval Process? When you apply for a pre-approval, lenders will look at a few key areas: Your income Your credit history Your assets and liabilities The property you’re interested in This comprehensive review will uncover any potential hurdles that could prevent you from securing financing later on. The earlier you identify these challenges, the better. Potential Issues a Pre-Approval Can Reveal Even if you feel confident that your finances are in good shape, a pre-approval might uncover issues you didn’t expect: Recent job changes or probation periods An income that’s heavily commission-based or reliant on extra shifts Errors or collections on your credit report Lack of a well-established credit history Insufficient funds saved for a down payment Existing debt reducing your qualification amount Any other financial blind spots you might not be aware of By addressing these issues early, you give yourself the best chance of securing the mortgage you need. A pre-approval makes sure there are no surprises along the way. Pre-Approval vs. Pre-Qualification: What’s the Difference? It’s important to understand that a pre-approval is more than just a quick online estimate. Unlike pre-qualification—which can sometimes be based on limited information and calculations—a pre-approval involves a thorough review of your finances. This includes looking at your credit report, providing detailed documents, and having a conversation with a mortgage professional about your options. Why Get Pre-Approved Now? The best time to secure a pre-approval is as soon as possible. The process is free and carries no risk—it just gives you a clear path forward. It’s never too early to start, and by doing so, you’ll be in a much stronger position when you're ready to make an offer on your dream home. Let’s Make Your Home Buying Journey Smooth A well-planned mortgage process can make all the difference in securing your home. If you’re ready to get pre-approved or just want to chat about your options, I’d love to help. Let’s make your home-buying experience a smooth and successful one!