Variable Rate Mortgage: Interest rate is not fixed but changes according to specific benchmark or reference rate.

  • Variable rate mortgages typically offer a lower interest rate than fixed rate mortgages. 
  • As interest rates decline, mortgage can be paid of faster.
  • Borrowers save money on reduced interest costs.
  • Interest rate is adjusted with changes in Bank of Canada or Lender’s prime rate changes.
  • Rise in interest rate causes increase in mortgage interest payment.
  • Borrower is exposed to risk and uncertainly in financial market.
 Fixed Rate Mortgage:  Locked in mortgage rate that stays the same for the duration of mortgage term.

  • Predictability in your monthly mortgage expenses.
  • Easier to compare and shop for best rate mortgage.
  • No surprises - Interest rate stays same over the term of the mortgage.
  • The longer the mortgage, the more interest you pay.
  • If interest rates fall, you could be stuck paying a higher interest rate.
  • To take advantage of falling interest rate you are required to refinance your mortgage which may trigger penalties.


Interest Only Mortgage: Only interest payment required as regular payment; principal is due on expiry of the term of the mortgage.

  • Borrowers pay only interest payments on the mortgage during the term of the mortgage.
  • Lower monthly payment during the term of the mortgage.
  • Gives borrowers more time to save before paying down principal.
  • Lenders typically require larger down payments from and charge more interest rate to cover their risk.
  • Loss of income or decreased property value may put the borrower in hardship.
  • Borrower must pay the principal amount at the expiry of the term of the mortgage. 

Balloon Mortgage: Loan has a fixed term after which both the interest and principal is required to be paid as lump sum at the end of mortgage term.

  • Fixed rate mortgage with no regular interest payment.
  • Attractive to short-term borrowers because this mortgage typically carries lower interest rates.
  • Option available to refinance to more traditional terms at the end of the mortgage term.
  • At of the end of mortgage term, you must pay the entire amount of outstanding interest and principal.
  • In the scenario of decline in property value, it may make it very difficult to refinance.
  • This type of loan may be risky for some borrowers because of large payment due at the end of the mortgage term .