Understanding how mortgage rates work is the first step to getting a great one. This guide covers every rate type, how the Bank of Canada affects your payment, and what to watch for at renewal.
The three main mortgage rate structures — each with different risk and reward profiles.
Your rate and payment are locked in for the entire term (1–10 years). Best if you want payment certainty and plan to stay in the home. Penalty to break is typically the greater of 3 months' interest or the IRD.
Rate moves with the Bank of Canada's prime rate. Your payment stays the same but the portion going to interest changes. Historically lower than fixed over long periods, but not always.
Similar to variable, but your actual payment amount changes when prime moves — rather than just the interest/principal split. Gives a clearer picture of your true cost.
Open mortgages can be repaid any time without penalty — at higher rates. Closed mortgages (the most common) have prepayment limits but lower rates.
Down payments under 20% require CMHC insurance — these are "high-ratio" mortgages. Conventional mortgages (20%+ down) have more flexibility but higher posted rates.
Some lenders (TD, National Bank) register a collateral charge instead of a standard mortgage charge — making it harder to switch lenders at renewal without legal costs.
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