Fixed vs variable calculator
Create a projection on the cost of a fixed or variable rate based on where you feel rates are headed.
Fixed
The rate and the payment both hold for the whole term.
Variable
Your payment is re-worked at every rate change, so the amortization holds and your budget moves.
Where do you think the variable rate goes over 5 years?
Down 1% by year 5, from 4.2% today to 3.2%.
Adjust the steps
4 cuts of 0.25%, 13 months apart, first in 6 months.
How many changes there are comes from the slider above. Moving it re-spaces them to fit the term; edit the spacing here and it stays put.
On this forecast, the variable costs lessOver 5 years, measured on interest paid
$23,730
| Figure | Fixed 4.5% | Variable 4.2% |
|---|---|---|
| Payment at the start | $3,320.84 | $3,233.65 |
| Payment at the end | $3,320.84 | $2,930.59 |
| Interest over the windowThe figure the comparison turns on | $126,029 | $102,299 |
| Balance at the end | $526,778 | $518,998 |
| Paid over the window | $199,250 | $183,300 |
Interest is what the comparison turns on, not the payment. The two options rarely have the same payment, and the bigger payment buys down more principal, so interest paid is the only figure that is fair to both. Total paid plus the balance still owed comes to the same ranking.
Where it breaks even
- The variable wins if it averages under
- 4.46%
- Held flat for the whole window. Below the 4.5% fixed, because a variable compounds monthly and a fixed compounds semi-annually.
Interest paid, running total
- Fixed 4.5%
- Variable, on this forecast
Year by year figures
| Year | Variable rate | Interest, fixed | Interest, variable | Balance, fixed | Balance, variable |
|---|---|---|---|---|---|
| 1 | 3.95% | $26,479 | $24,195 | $586,629 | $585,882 |
| 2 | 3.7% | $52,350 | $46,469 | $572,650 | $570,723 |
| 3 | 3.45% | $77,585 | $66,850 | $558,035 | $554,511 |
| 4 | 3.2% | $102,154 | $85,373 | $542,754 | $537,240 |
| 5 | 3.2% | $126,029 | $102,299 | $526,778 | $518,998 |
An estimate for comparison, not a prediction. Nobody knows where rates go, which is why the forecast is yours to set rather than ours to supply. Fixed rates compound semi-annually and variable rates monthly, per the usual Canadian conventions. Payments are monthly, each rate is assumed to be the one you are actually offered, and no penalty to break either option early is included.