The interest rate is only one of several variables that determine the real cost of a mortgage. Here's a plain-language overview to better prepare for your meeting with a mortgage broker or your banker.
Fixed rate or variable rate?
FIXED RATE
- Constant payment for the whole term
- Maximum budget predictability
- Often chosen for a first purchase or a tight budget
- Historically slightly more expensive on average
VARIABLE RATE
- Follows the Bank of Canada's key rate
- Often lower historically, but can rise quickly
- Better suited to buyers with a financial cushion
- Requires tolerance for payment fluctuations
Applicable rates vary daily. For a valid quote for your file, talk to a mortgage broker.
Amortization: 25 or 30 years?
With a down payment ≥ 20%, 30-year amortization is possible with most lenders. As an example, on a $500,000 loan at 5%:
| Duration | Approx. monthly payment | Approx. total interest |
|---|---|---|
| 25 years | ~2 908 $ | ~372 400 $ |
| 30 years | ~2 669 $ | ~460 800 $ |
Illustrative example. The exact figures depend on your lender and your file.
The federal stress test
All mortgages are currently qualified at max(contract rate + 2%, 5.25%). Result: your qualified borrowing capacity may be 15 to 20% lower than the calculation based on the contract rate. Use my capacity calculator for informational purposes.
CMHC insurance
Under a 20% down payment, mortgage loan insurance is mandatory (CMHC, Sagen or Canada Guaranty). The premium varies with the down-payment percentage and is added to the borrowed principal.
Mortgage broker or bank?
A mortgage broker licensed by the AMF shops for you among several lenders. They are usually paid by the chosen lender. A bank offers only its own products.
If you want to explore mortgage brokerage, I can connect you with partners I know — you remain free to choose who you work with.
Term vs amortization
Two concepts often confused:
- Amortization : total time to repay (25 or 30 years)
- Term : current contract term (1, 3, 5, 7, 10 years). At the end, you renegotiate.
5-year term = standard. 3-year term = if you plan to sell or expect rates to drop. 1-2 year term = an aggressive patience strategy.
FAQ — financing
How much does a pre-approval cost?
Free. No commitment, a “soft” credit check most of the time.
How long does it take to get the final financing?
From accepted offer to final confirmation: 7 to 14 days.
What if my locked rate expires before possession?
You pay the rate in effect at signing. Coordinating the dates matters.