Fixed rates keep payments unchanged through the mortgage term, while variable rates can move with a lender's prime rate and bring more interest-rate risk.
If variable rates rise, ARM payments change immediately, while VRM payments stay flat and more of each payment goes toward interest instead.
Fixed rates offer full payment predictability, but breaking them early can trigger steep pre-payment penalties; variable mortgages cap that cost at three months' interest.
Variable mortgages can switch to fixed mid-term without a prepayment penalty, offering flexibility if rising costs strain finances; fixed mortgages cannot switch to variable.
Choose fixed on a strict budget or for payment certainty. Choose variable if you value optionality, accept rate risk, or might move.
