Choosing between a fixed and variable rate mortgage is one of the biggest decisions you’ll make as a homebuyer. It’s also one of the questions I hear most often from Saskatchewan buyers—and there’s no one-size-fits-all answer.
In this guide, I’ll break down exactly how each type works, the pros and cons of both, and help you figure out which option makes sense for your situation. Whether you’re buying your first home or renewing your mortgage, understanding this choice can save you thousands of dollars over your mortgage term.
Historically, variable rate mortgages have saved borrowers money over time—but that doesn’t mean they’re right for everyone. Your personal financial situation and comfort with risk matter just as much as the numbers.
How Fixed Rate Mortgages Work
A fixed rate mortgage locks in your interest rate for the entire term—typically 1 to 5 years in Canada. Your payment stays exactly the same every month, no matter what happens to interest rates in the broader economy.
Pros of Fixed Rates
- Predictable payments - You know exactly what you’ll pay each month, making budgeting straightforward
- Protection from rate increases - If rates rise, your payment stays the same
- Peace of mind - Many Saskatchewan homeowners sleep better knowing their rate won’t change
- Easier to qualify - Lenders use your actual rate for qualification (not a stress-tested higher rate for variable)
Cons of Fixed Rates
- Higher starting rate - Fixed rates are typically 0.5% to 1% higher than variable rates
- Larger prepayment penalties - Breaking a fixed mortgage early often costs thousands more than a variable
- Less flexibility - If rates drop, you’re stuck paying the higher rate unless you refinance
How Variable Rate Mortgages Work
A variable rate mortgage fluctuates with your lender’s prime rate, which moves with the Bank of Canada’s policy rate. When the Bank of Canada raises or lowers rates, your mortgage rate adjusts accordingly.
There are two types of variable rate mortgages in Canada:
- Adjustable rate mortgage (ARM) - Your payment changes when rates change
- Variable rate mortgage (VRM) - Your payment stays the same, but the portion going to principal vs. interest shifts
Pros of Variable Rates
- Lower starting rate - You typically save 0.5% to 1% compared to fixed rates
- Historical savings - Over time, variable rates have often cost less than fixed
- Lower penalties - Usually just 3 months’ interest if you break early
- Benefit from rate drops - If rates decrease, you save immediately
Cons of Variable Rates
- Payment uncertainty - Your costs can increase if rates rise
- Stress factor - Some borrowers find rate fluctuations anxiety-inducing
- Budgeting challenges - Harder to plan when payments might change
- Trigger rate risk - In extreme cases, payments may not cover interest costs
Key Factors to Consider
When deciding between fixed and variable rates, think about these factors specific to your situation:
Your Risk Tolerance
Be honest with yourself. If you’d lose sleep over a potential rate increase, a fixed rate provides valuable peace of mind—even if it costs a bit more. There’s real value in financial certainty.
Your Financial Cushion
Do you have room in your budget if payments increase by $200-300 per month? If you’re stretching to afford your home, a fixed rate offers more security. If you have healthy savings and cash flow flexibility, a variable rate’s potential savings might be worth the risk.
Your Mortgage Term Plans
Planning to sell or refinance within a few years? Variable mortgages have much lower penalties for breaking early—often saving you thousands compared to fixed rate penalties. This matters more than many buyers realize.
Current Rate Environment
Where are rates headed? While nobody can predict with certainty, understanding the Bank of Canada’s direction helps. In rising rate environments, locking in fixed makes more sense. When rates are high and expected to fall, variable becomes more attractive.
What Saskatchewan Buyers Are Choosing
Here in Saskatchewan, I see a healthy mix of both options among my clients. First-time buyers often lean toward fixed rates for the predictability—especially when they’re already adjusting to homeownership costs. More experienced homeowners sometimes prefer variable, having weathered rate cycles before.
The right choice depends entirely on your personal situation, not what the market is doing or what your neighbour chose.
A Hybrid Approach: Split Mortgages
Some lenders offer split mortgages where you divide your mortgage between fixed and variable portions. For example, you might put 60% in a fixed rate and 40% in variable. This gives you partial protection from rate increases while still benefiting from variable rate savings.
It’s not the right fit for everyone, but worth discussing if you’re torn between options.
Common Mistakes to Avoid
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Choosing based on rate alone - The lowest rate isn’t always the best deal. Consider penalties, prepayment options, and flexibility.
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Ignoring your stress levels - Financial anxiety is real. A slightly higher fixed rate may be worth it for your mental health.
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Not considering your timeline - If you might move or refinance, variable’s lower penalties could save you significantly.
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Following the crowd - What works for others may not work for you. Make decisions based on your situation.
Use our mortgage calculator to see how different rates affect your monthly payments.
Get Expert Mortgage Guidance in Saskatchewan
Still unsure which option is right for you? As a licensed mortgage associate in Saskatchewan, I help buyers understand their options and make confident decisions—not just about rates, but about the overall mortgage that fits their life.
My first-time home buyer service includes:
- Personalized rate analysis - compare fixed and variable options for your specific situation
- Access to multiple lenders - I shop the market to find your best rate and terms
- Penalty calculations - understand the true cost of each option
- Ongoing support - guidance through rate changes and future renewals
- Local Saskatchewan expertise - I understand our market and your needs
Ready to find the right mortgage for you? Contact me today for a free consultation!
Related Articles
- Understanding Mortgage Rates - Learn how mortgage rates are determined and what affects your rate
- First-Time Home Buyer Guide - Complete guide to buying your first home in Saskatchewan
- Mortgage Pre-Approval Guide - Everything you need to know about getting pre-approved
- When Does Refinancing Make Sense? - Calculate if refinancing is right for your situation
