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What is a Fixed Rate Mortgage?
A fixed rate mortgage offers a fixed interest rate that remains in effect for the entire loan term, protecting you from potential increases in market interest rates. This means that your regular principal and interest payments will be consistent and predictable throughout the mortgage term, making it easier to manage your finances and plan for the future. At RBC, we offer three types of fixed-rate mortgages: fixed-rate closed, convertible, and fixed-rate open mortgages. While these options provide stability, it's worth noting that if interest rates drop, you won't be able to take advantage of the lower rate unless you refinance your loan.
Special Offer Rates for Fixed Rate Mortgages
Below are current special offers1 for select fixed rate closed term mortgages:
| Term | Rate | APR |
|---|---|---|
| 2 Year Fixed Closed | % | % |
| 3 Year Fixed Closed | % | % |
| 5 Year Fixed Closed | % | % |
Why Choose a Fixed Interest Rate Mortgage
Get Locked-in Security
Your interest rate stays fixed for the entire term. That means you'll know exactly what to expect, including:
- The interest rate of your mortgage
- The amount of your regular mortgage payments
- The portion of your payment that goes toward principal and interest
- The amortization of your mortgage (how long it will take to pay it off)
Enjoy a Rate Guarantee
- If you are arranging a new mortgage, your fixed interest rate can be guaranteed up to 120 days before the closing date of your home. If interest rates go up during that time, you'll still receive the lower rate — guaranteed.
- And when it's time to renew, RBC will guarantee your mortgage interest rate for 30 days prior to your renewal date.
Flexible Payment Options
- Choose your payment schedule: Weekly, bi-weekly, semi-monthly, monthly and accelerated payment options.
- Select an amortization period between 5 and 30 years.
- Pay down your mortgage faster with options like Double-up payments, prepayments or increase your regular payment amount .
- Skip-a-payment allows you to skip the equivalent of one month's regular payment amount when you need some budget flexibility.
Types of Fixed Rate Mortgages
| Fixed Rate Closed | Fixed Rate Open | Convertible | |
|---|---|---|---|
| Best for | Home buyers and owners who prioritize payment certainty and budget predictability. | Those who are between homes, expecting to make a very large extra payment or pay off in full soon (e.g. using funds from inheritance, property sale), or planning to refinance within 6-12 months. | Those wanting short-term rate lock with flexibility to extend when rates are favourable. |
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Renewing Your Fixed Rate Mortgage
Renewal time is a great opportunity to review your financial situation, and our goal is to help you choose the right mortgage options for your circumstances. When you're renewing a fixed rate mortgage during a time of rising interest rates, there may be some additional options you'll want to consider. Watch the video below to discover steps you can take now to help lower your mortgage payment before it's time to renew.
Don't have YouTube access?
Renewing Your Fixed Rate Mortgage
In this video, we're going to talk about what happens to your mortgage payments when you renew your fixed rate mortgage during a time when interest rates are rising. And, we'll cover some of the options you have for managing those payments.
First, let's talk about what happens when you renew your mortgage. Your mortgage comes up for renewal when your mortgage term ends. The term refers to how long your rate is set for.
Amortization, which is another part of your mortgage, is the total length of time it takes to pay off your mortgage in full. Say you originally chose a 5 year term and 25 year amortization.
When your mortgage first comes up for renewal at the end of 5 years, there would be 20 years left on the amortization. At renewal, you will choose a new term at mortgage rates available at that time. This term, along with your new rate, mortgage balance and remaining amortization are all used to calculate your new payment amount.
Now, if your mortgage is coming up for renewal in a rising interest rate environment, your new mortgage payment could be higher than what you pay now. How much higher will depend on a few factors but some of the key ones include: Your current mortgage type - whether it is fixed or variable and your new interest rate.
When you have a fixed rate mortgage, the higher payment could be due to the higher interest rate you are renewing at, compared to the
interest rate you had before your renewal. Let's look at an example where you start with a $478,000 mortgage and a 25 year amortization. After 5 years, your fixed rate increases from 2% to 5%. As a result, your monthly payment would increase from $2,024 to $2,631.
Nobody likes to see payments go up. Fortunately, there are a few steps you can take to help lower your monthly mortgage payment before it's time to renew. You can make a lump sum payment; you can Double Up your payments; or you can increase your regular mortgage payment. Any of these actions can help reduce your principal balance and help lower the impact of a higher payment at renewal. In addition to these options, there may be other ways to manage your mortgage payments, depending on your personal circumstances. Some clients may be eligible to increase their amortization period to help lower the payment amount.
We can help you take steps to manage your cash flow and your mortgage. Talk to an RBC advisor today!
Fixed Rate Mortgages FAQs
If you have a fixed rate mortgage, changes to the RBC Prime Rate will not affect your interest rate or payments during your mortgage term. Your rate is locked in for the full length of the term, so even if the Bank of Canada raises or lowers its policy rate and the RBC Prime Rate changes, your mortgage rate and payment remain the same. With a fixed rate mortgage, you're generally protected from market fluctuations until your term ends.
Yes, you can break or change your fixed rate mortgage before your term ends, but there may be costs and conditions involved.
Ending your mortgage term early might result in a prepayment charge, which is determined by your current interest rate, outstanding balance and other factors.
Before making a decision, it's worth comparing the potential savings to the prepayment charge cost. Some lenders offer penalty-free early renewal options within a set period before your mortgage matures, which may reduce or eliminate penalties.
Yes, you can refinance a fixed rate mortgage. However, refinancing during your term typically involves breaking your mortgage early and paying a prepayment penalty.
Refinancing may make sense if the long-term savings from a lower interest rate – or the ability to access your home equity – outweigh the prepayment charge. Take your time to carefully evaluate the costs and benefits, remembering that refinancing can be done at any point during your mortgage term or at renewal.
Yes, you can switch from a fixed rate to a variable rate, but doing so may trigger a prepayment charge.
The process typically involves renegotiating your mortgage with your lender. If you're considering a switch, it's a good idea to speak with your mortgage advisor to understand your options and the associated costs. In many cases, making the change at renewal is more cost-effective, as it may avoid prepayment charges.
HomeProtector Mortgage Insurance
Helps you to not only safeguard yourself and your family's lifestyle, but also your assets and net worth.
Personal lending products and residential mortgages are offered by Royal Bank of Canada and are subject to its standard lending criteria. Some conditions apply.
The annual percentage rate (APR) is based on a $ 250,000 mortgage for the applicable term assuming a processing fee of $300 (which includes fees associated with determining the value of the property). If there are no cost of borrowing charges, the APR and the interest rate will be the same.
For mortgages approved on or before February 28, 2017 funds must be advanced within 120 days of date of application in order to qualify for the Special Offer rate. Offer may be changed, withdrawn or extended at any time, without notice.