An adjustable rate mortgage is a home loan with a variable rate, which is based on the RMG Prime Rate. As such, your rate will change when the prime rate does. While many homeowners will remain comfortable with their adjustable rate mortgage, others may wish to lock-in to a fixed rate term to avoid further potential rate fluctuations.

If you’re anxious about the impact of the rate increase on your mortgage and would prefer the security of a fixed rate term – where your payments are guaranteed not to change – it’s easy to lock in your mortgage rate. In fact, you can lock into a fixed rate mortgage term of equal or greater length at any time and at no cost. When you lock into a fixed rate, you start a new term with a new rate. You can choose a term that works for you – you’ll get a new maturity date and some of the conditions of your mortgage may change. It’s a good idea to review all the details of your new mortgage so you’re fully informed before you lock in.

It doesn’t cost anything to lock in your mortgage. If you have an adjustable rate mortgage right now and you lock into a fixed rate term of equal or greater length, there’s no cost to you.

The same privilege payment options are available for homeowners in a fixed rate term as for those in an adjustable rate term. However, when you lock in your mortgage, your current term ends and you start a new fixed rate term. This new term will come with its own maturity date, determined by the term length you choose.

Yes, the penalty structure may change if you lock into a fixed rate term. Before signing an offer to lock in your mortgage, it’s important to be fully informed. We recommend reviewing the terms and conditions of the new term, including the prepayment penalty information.

The decision to lock in your mortgage is one that only you can make. To figure out if you should lock in, you need to determine what level of rate fluctuation you can tolerate – both financially and emotionally. The prime rate changes in response to changes in the Bank of Canada’s key lending rate. Although you may hear speculations about upcoming rate changes in the news, we can’t know for sure when the rate will in fact change, or by how much, until it happens. Historically, the prime rate increases or decreases by 0.25 - 0.50%.

In short, yes, you can move back into an adjustable rate mortgage should you choose to later on, but you may have to pay a penalty to do so before maturity (this is called an early renewal).