Locking in a Variable Rate Mortgage

Lee Welbanks • May 3, 2023

If you have a variable rate mortgage and recent economic news has you thinking about locking into a fixed rate, here’s what you can expect will happen. You can expect to pay a higher interest rate over the remainder of your term, while you could end up paying a significantly higher mortgage penalty should you need to break your mortgage before the end of your term.


Now, each lender has a slightly different way that they handle the process of switching from a variable rate to a fixed rate. Still, it’s safe to say that regardless of which lender you’re with, you’ll end up paying more money in interest and potentially way more money down the line in mortgage penalties should you have to break your mortgage.


Interest rates on fixed rate mortgages


Fixed rate mortgages come with a higher interest rate than variable rate mortgages. If you’re a variable rate mortgage holder, this is one of the reasons you went variable in the first place; to secure the lower rate.


The perception is that fixed rates are somewhat “safe” while variable rates are “uncertain.”  And while it’s true that because the variable rate is tied to prime, it can increase (or decrease) within your term, there are controls in place to ensure that rates don’t take a roller coaster ride. The Bank of Canada has eight prescheduled rate announcements per year, where they rarely move more than 0.25% per announcement, making it impossible for your variable rate to double overnight.


Penalties on fixed rate mortgages


Each lender has a different way of calculating the cost to break a mortgage.  However, generally speaking, breaking a variable rate mortgage will cost roughly three months of interest or approximately 0.5% of the total mortgage balance. While breaking a fixed rate mortgage could cost upwards of 4% of the total mortgage balance should you need to break it early and you’re required to pay an interest rate differential penalty.


For example, on a $500k mortgage balance, the cost to break your variable rate would be roughly $2500, while the cost to break your fixed rate mortgage could be as high as $20,000, eight times more depending on the lender and how they calculate their interest rate differential penalty.


The flexibility of a variable rate mortgage vs the cost of breaking a fixed rate mortgage is likely another reason you went with a variable rate in the first place.


Breaking your mortgage contract


Did you know that almost 60% of Canadians will break their current mortgage at an average of 38 months? And while you might have the best intention of staying with your existing mortgage for the remainder of your term, sometimes life happens, you need to make a change.


Here’s is a list of potential reasons you might need to break your mortgage before the end of the term. Certainly worth reviewing before committing to a fixed rate mortgage. 


  • Sale of your property because of a job relocation.
  • Purchase of a new home.
  • Access equity from your home.
  • Refinance your home to pay off consumer debt.
  • Refinance your home to fund a new business.
  • Because you got married, you combine assets and want to live together in a new property.
  • Because you got divorced, you need to split up your assets and access the equity in your property
  • Because you or someone close to you got sick
  • Because you lost your job or because you got a new one
  • You want to remove someone from the title.
  • You want to pay off your mortgage before the maturity date.


Essentially, locking your variable rate mortgage into a fixed rate is choosing to voluntarily pay more interest to the lender while giving up some of the flexibility should you need to break your mortgage.


If you’d like to discuss this in greater detail, please connect anytime. It would be a pleasure to walk you through all your mortgage options and provide you with professional mortgage advice.

Lee Welbanks

Buying a Second Property

By Lee Welbanks • October 22, 2025
If you’ve been thinking about buying a second property and you’re looking to put some of the pieces together, you’ve come to the right place! Whether you’re looking to buy a vacation property, start a rental portfolio, or help accommodate a family member, there are many reasons to buy a second property (while keeping your existing property), which might make sense for you! Now, while there are many great reasons to buy a second property, there is also a lot to know as you walk through the process. The key here is to have absolute clarity around your why. Ask yourself, why do you want to buy a second property? This isn’t a decision to be taken lightly or one that should be made too quickly. Buying a second property should be a strategic decision that allows you to accomplish your goals, and it should include an assessment of your overall financial health. So with clear goals in mind, the best place to start the process is to have a conversation with an independent mortgage professional. This will allow you to assess your financial situation, outline the costs, and put together a plan to make it happen. While purchasing a second property is similar to buying a primary residence, there are some key differences. Just because you’ve qualified in the past for your existing mortgage doesn’t mean you’ll qualify to purchase a second property. One key difference is the amount of downpayment you might be required to come up with. A property that is owner-occupied or occupied by a family member on a rent-free basis will require less of a downpayment than if the second property will be used to generate an income. So, depending on the property's intended use, you might have to come up with as much as 25%-35% down. This is where strategic planning comes in. Consider unlocking the equity in your existing home to finance the downpayment to purchase your second home. Here are a few ways you can go about doing that: Securing a new mortgage if you own your property clear title Refinancing your existing mortgage to access additional funds Securing a home equity line of credit (HELOC) Getting a second mortgage behind your existing first mortgage Securing a reverse mortgage The conversation about buying a second property should include assessing your overall financial health, leveraging your existing assets to lower your overall cost of borrowing, and figuring out the best way to accomplish your goals. And as it's impossible to outline every scenario in a simple blog post, if you’d like to discuss your goals and put a plan together to finance a second property, connect anytime. It would be a pleasure to work with you.

Home Reno Dreams? Let’s Talk Mortgage Financing

By Lee Welbanks • October 15, 2025
How to Use Your Mortgage to Finance Home Renovations Home renovations can be exciting—but they can also be expensive. Whether you're upgrading your kitchen, finishing the basement, or tackling a much-needed repair, the cost of materials and labour adds up quickly. If you don’t have all the cash on hand, don’t worry. There are smart ways to use mortgage financing to fund your renovation plans without derailing your financial stability. Here are three mortgage-related strategies that can help: 1. Refinancing Your Mortgage If you're already a homeowner, one of the most straightforward ways to access funds for renovations is through a mortgage refinance. This involves breaking your current mortgage and replacing it with a new one that includes the amount you need for your renovations. Key benefits: You can access up to 80% of your home’s appraised value , assuming you qualify. It may be possible to lower your interest rate or reduce your monthly payments. Timing tip: If your mortgage is up for renewal soon, refinancing at that time can help you avoid prepayment penalties. Even mid-term refinancing could make financial sense, depending on your existing rate and your renovation goals. 2. Home Equity Line of Credit (HELOC) If you have significant equity in your home, a Home Equity Line of Credit (HELOC) can offer flexible funding for renovations. A HELOC is a revolving credit line secured against your home, typically at a lower interest rate than unsecured borrowing. Why consider a HELOC? You only pay interest on the amount you use. You can access funds as needed, which is ideal for staged or ongoing renovations. You maintain the terms of your existing mortgage if you don’t want to refinance. Unlike a traditional loan, a HELOC allows you to borrow, repay, and borrow again—similar to how a credit card works, but with much lower rates. 3. Purchase Plus Improvements Mortgage If you're in the market for a new home and find a property that needs some work, a "Purchase Plus Improvements" mortgage could be a great option. This allows you to include renovation costs in your initial mortgage. How it works: The renovation funds are advanced based on a quote and are held in trust until the work is complete. The renovations must add value to the property and meet lender requirements. This type of mortgage lets you start with a home that might be more affordable upfront and customize it to your taste—all while building equity from day one. Final Thoughts Your home is likely your biggest investment, and upgrading it wisely can enhance both your comfort and its value. Mortgage financing can be a powerful tool to fund renovations without tapping into high-interest debt. The right solution depends on your unique financial situation, goals, and timing. Let’s chat about your options, run the numbers, and create a plan that works for you. 📞 Ready to renovate? Connect anytime to get started!