On a $500,000 mortgage over 25 years, a 4.59% fixed rate costs $107,180 in interest across five years. A 4.95% variable rate costs $115,818 if rates hold still, or $8,638 more. Enter your two quotes and see how the gap moves.
What does the tool actually compare?
You give it a five year fixed rate and today’s variable rate. The fixed loan runs at one rate for all five years. Variable runs three ways: rates drifting lower, staying put, or drifting higher, with the payment recalculated at the start of each year so the amortization stays on track.
The rate moves 0.2 points a year, so by year five it sits 0.8 points from where it began (the scenario labels round that up to one point). For each path you get the interest paid and the difference from the fixed loan. A positive difference means variable costs more.
How do the three paths compare?
These are the default numbers, with a fixed rate of 4.59% and a variable rate of 4.95%.
| If rates | Variable interest | Against fixed |
|---|---|---|
| Fall | $106,585 | -$595 |
| Stay where they are | $115,818 | +$8,638 |
| Rise | $125,075 | +$17,895 |
What does a real comparison look like?
Take a $500,000 loan, 25 years of amortization, a fixed rate of 4.59% and a variable rate of 4.95%.
The fixed loan pays $107,180 in interest and leaves a balance of $439,633 after five years. Variable starts 0.36 points higher, so it needs a falling rate just to break even, and even then it saves only $595. That’s thin. If rates hold, you pay $8,638 more, and if they climb you pay $17,895 more, which is a big enough swing that you should ask if your budget could take the higher payment year after year.
Now drop the variable rate to 4.25% and the picture flips. If rates stay put, interest is $99,043, which is $8,136 below the fixed loan. Even the rising path stays close, at $1,062 above, which you’ll probably find surprising. And when both rates sit at 4.59%, the flat path shows no difference at all, while the fall and rise paths swing about $9,200 each way.
Is the cheaper rate always the better choice?
Not necessarily. The Financial Consumer Agency of Canada describes the usual trade-off like this:
A fixed interest rate stays the same for the entire term. It’s usually higher than a variable interest rate for a similar term.
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So the lower sticker price on a variable rate buys you uncertainty. In the default case here it’s the other way round, with variable priced above fixed, and then the only reason to pick it is a bet that rates will fall. If you sleep better knowing the payment can’t move, that peace of mind has real value, even if it costs a few bucks more over the term.
Another wrinkle: some variable mortgages keep your payment steady while the rate floats. When rates rise, more of each payment goes to interest and less to principal, so you can finish the term owing more than you expected. Ask your lender which kind you’re being offered, because this tool recalculates the payment each year and doesn’t show that effect.
What does it leave out?
It covers five years of interest, not the whole mortgage, so don’t read it as a total cost. Penalties aren’t in there. If you might break the mortgage early, and plenty of people do before the term is up, estimate the cost with the mortgage penalty calculator. It also recalculates the variable payment every year, and your lender may set payments differently.
The three paths are illustrations, not forecasts, and they aren’t a prediction. Nobody knows where rates are going, and that includes us. So pick a mortgage whose payment you could carry in the worst path, and leave some slack in your budget for it. To see what a higher payment would do to that budget when the term ends, try the mortgage renewal calculator. For a full payment schedule on either loan, open the mortgage amortization calculator, and for a single rate use the mortgage calculator.
What this page is based on
The maths uses the rates you enter, semi-annual compounding and monthly payments. The rate paths are set inside the calculator, not taken from any forecast. This site has no tie to any government body, and the results are estimates.
About this calculator
- What it does
- Compare the interest cost of fixed and variable mortgages under three rate paths.
- Category
- Mortgage
- Last checked
- September 30, 2026
- Result type
- Estimate for information only, not tax advice.
Frequently asked questions
So which is cheaper, fixed or variable?
That depends on where rates go. With the default numbers, variable costs $8,638 more if rates stay flat and $595 less if they fall.
Where do the three rate paths come from?
The variable rate moves 0.2 points a year, down, flat or up, and the payment is recalculated every year.
Does it include penalties?
No, only interest. Use the penalty calculator to see what leaving either type early would cost.
Is the gap a forecast?
No. The paths show what could happen, nothing more. Pick a loan you could still carry in the worst case.
How far ahead does it look?
Five years, the length of a typical term. For the fixed loan you also see the balance left after those five years.
Sources and updates
Updated: . How we check rates · Editorial team · Updates