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Choosing the right mortgage rate type is one of the most important financial decisions you’ll make when buying a home or refinancing your mortgage.
With so many options available, from fixed-rate mortgages to variable-rate loans and even hybrid mortgage types, understanding how they work can help you save thousands of dollars over time.
In this guide, we’ll explain the different types of mortgage rates, how they work, and their pros and cons so you can make an informed decision that best suits your financial needs.
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A mortgage rate type determines how interest is applied to your loan over its term.
The rate you choose impacts your monthly payments, long-term interest costs, and overall loan flexibility.
The main types of mortgage rates include:
Each option has advantages and drawbacks depending on your financial situation and risk tolerance.
A fixed-rate mortgage means your interest rate remains constant throughout your mortgage term, regardless of market fluctuations.
This results in stable monthly payments, making budgeting easier.
A fixed-rate mortgage is ideal if:
📌 Want to explore fixed-rate options? Compare Fixed Mortgage Rates Here
A variable-rate mortgage has an interest rate that fluctuates based on the Bank of Canada’s prime rate.
This means your monthly payments may increase or decrease over time.
A variable-rate mortgage is best if:
📌 Curious about variable rates? Learn More About Variable Mortgage Rates
A hybrid mortgage (or combination mortgage) splits your loan into two parts: one portion at a fixed rate and the other at a variable rate.
This allows you to benefit from the stability of a fixed rate while also enjoying the potential savings of a variable rate.
Examples of mortgage products with this rate type are the TD Flexfline mortgage, MCAP Fusion Mortgage, RBC Homeline Plan, and MBO Homeowner ReadiLine Mortgage.
Hybrid mortgages are ideal if:
You’re comfortable with a balanced risk approach.
With an interest-only mortgage, you only pay interest on your loan for a set period. After that, you start repaying the principal.
Most private mortgages are interest-only mortgages.
Consider an interest-only mortgage if:
A convertible mortgage allows you to start with a short-term rate (fixed or variable) and switch to a long-term fixed rate without penalties.
A convertible mortgage works well if:
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Here’s a quick comparison to help you decide:
Mortgage Type | Best For | Key Benefits | Potential Risks |
Fixed-Rate | Long-term homeowners | Predictable payments, protection from rate hikes | Higher initial rate |
Variable-Rate | Risk-tolerant borrowers | Lower initial rate, potential savings | Unpredictable payments |
Hybrid | Balanced approach | Mix of stability and flexibility | Complex structure |
Interest-Only | Short-term ownership | Lower initial payments | No equity buildup, higher future costs |
Convertible | Flexible borrowers | Option to switch without penalties | May have higher costs |
Understanding mortgage rate types is key to making a smart home financing decision.
Whether you prioritize stability, savings, or flexibility, there’s a mortgage type that fits your needs.
📌 Ready to compare your options? Check out the latest rates and find the best mortgage for you!
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