Thinking about switching your mortgage type? Whether you're on a fixed or variable rate, your needs—and the market—can shift over time. As a leading Toronto mortgage broker, I am often asked: Can you switch from a fixed to a variable rate?. Let’s break it down.

Fixed vs. Variable Mortgages: A Quick Refresher

• Fixed-rate mortgages lock in your interest rate and monthly payment for a set term (commonly 1–5 years). Stability is their biggest appeal.

• Variable-rate mortgages, on the other hand, fluctuate with your lender’s prime rate, usually influenced by the Bank of Canada’s overnight rate. Your payment structure may change, affecting how much goes toward interest.

Toronto’s housing market is dynamic, so understanding these mortgage types is essential, especially if you're considering refinancing or renewal.

Switching Means Breaking Your Current Mortgage

Here’s what many Toronto homeowners don’t realize: switching mortgage types mid-term means breaking your existing mortgage agreement, and that can trigger penalties.

Penalties Explained: Fixed vs. Variable

• Fixed-rate mortgages: The penalty is the greater of three months' interest or the Interest Rate Differential (IRD). If rates have dropped since you locked in, the IRD could be steep.

• Variable-rate mortgages: Always a three-month interest penalty. It’s simpler—and typically cheaper.

This is one reason many Toronto mortgage brokers recommend variable rates to clients who need future flexibility.

Can You Switch from Fixed to Variable in Toronto?

It’s possible, though less common due to potentially high penalties. It may still be a smart move if:

• You’re refinancing to access equity or consolidate debt.

• You want to roll the penalty into a new mortgage product.

• You believe variable rates will stay low or continue to drop.

Tip from a Toronto mortgage broker: If you’re staying with your current lender, they might reduce your penalty to keep your business. It’s always worth asking.

Switching from Variable to Fixed: A Common Move in Toronto

Most variable-rate mortgages in Canada—and specifically in Ontario—allow you to lock into a fixed rate mid-term. Here's how it works:

• You can lock in with your current lender at any time.

• There's usually no penalty unless you're switching lenders.

• The fixed rate will be based on current market rates—not your original options.

• You must lock into a term equal to or longer than your remaining mortgage term.

Many Toronto clients made this switch during 2022 and 2023 when interest rates spiked.

A Common Misconception About Locking In

One of the most common myths I encounter as a Toronto mortgage broker: people believe they can still get their original fixed rate when locking in. That’s not true.

You’ll be offered current fixed rates, which might be higher or lower than before. And yes, if you took a five-year variable rate two years ago, you’ll need to lock into a term of at least three years if switching now.

When Should You Lock Into a Fixed Rate?

Locking in makes sense when interest rates are rising quickly. But in mid-2025, the Bank of Canada has signaled more rate cuts ahead, which could push variable rates lower. In this scenario, locking into a fixed rate might not be your best move.

Every situation is unique. That’s why working with an experienced Toronto mortgage broker is key to navigating these choices confidently.

Understanding What Drives Fixed vs. Variable Rates

Variable rates follow the BoC. Fixed rates react to bond market trends, which reflect inflation, housing demand, and sometimes U.S. financial policy. This difference often causes confusion—especially when fixed and variable rates move in opposite directions.

What Happens at Mortgage Renewal?

The best time to switch mortgage types—without penalties—is during renewal. You can:

• Switch from fixed to variable or vice versa

• Shop for better terms with other lenders

• Get personalized advice from a Toronto mortgage broker to match today’s market with your financial goals

Let’s Review Your Mortgage Strategy

If you're thinking about refinancing, switching mortgage types, or approaching your renewal, now’s the time to act. As a trusted Toronto mortgage broker, I can help you find the strategy that fits your lifestyle and the local market outlook.

📞 Call 647-694-7033
📧 Email: [email protected]

Let's make your mortgage work for you—not the other way around.