Fixed or Variable Mortgage Rate: What’s the Difference?

If you're a first-time homebuyer and need a quick primer on the types of mortgages available, here's what you should know:

Fixed Rate Mortgage

  • "locked in" interest rate - principal and interest payments will always be the same
  •  secure, not subject to interest rate fluctuations
  • higher rates than variable mortgages, typically

Variable Rate Mortgage

  • subject  to interest rate fluctuations, although payments remain the same
  • rising interest rates mean that more is paid towards interest; falling interest rates mean that more is paid towards principal
  • amortization period is extended if more interest than principal is paid
  • option to "lock into" a fixed rate at any time
  • lowest rates are available for variable mortgages, usually