TL;DR
This page is product-focused. For side-by-side fixed vs variable comparisons, use the fixed vs variable hub.
What a variable mortgage is
A variable mortgage is typically priced at prime plus or minus a lender spread. When prime moves, your borrowing cost changes. Depending on product design, your payment, amortization, or both can adjust.
The two variable product structures borrowers must understand
| Structure | What usually changes | Main borrower risk | Best fit |
|---|---|---|---|
| Adjustable-payment variable | Payment typically moves with prime changes | Monthly cash-flow volatility | Households with strong monthly surplus and flexibility |
| Fixed-payment variable | Payment may stay stable while amortization shifts | Trigger/trigger-point pressure if rates rise enough | Borrowers who want steadier payments but can monitor risk |
Not all variable contracts behave the same. Product structure matters more than headline discount alone.
Who this product is usually a good fit for
- You can handle payment movement without relying on unsecured credit.
- You have liquidity to prepay principal and keep amortization healthy.
- You want flexibility and lower break-cost probability relative to many fixed options.
- You have a rules-based plan for when to hold, prepay, or convert.
When variable is usually a poor fit
- Your budget is already tight and rate shocks would disrupt core expenses.
- You are deciding purely on the starting discount without downside modelling.
- You need strict payment certainty for near-term life events or debt restructuring.
- You do not plan to monitor trigger risk, amortization drift, and renewal timing.
Total-cost reality: discount is not the full story
Variable outcomes depend on rate path, hold period, and behavior. A better starting rate can still produce a weak outcome if cash flow breaks, amortization stretches, or switching decisions happen late.
Use calculators to compare full scenarios, not only month-one payment.
Behavior traps that make variable mortgages expensive
| Mental model | Common mistake | Pragmatic correction |
|---|---|---|
| Anchoring | Fixating on today’s discount and ignoring stress-case payments | Evaluate base, +1%, and +2% scenarios before selecting term |
| Present bias | Choosing lower current payment without trigger-risk monitoring plan | Set explicit trigger checkpoints and prepayment actions now |
| Status quo bias | Staying passive while amortization drifts | Review payment and principal progress quarterly |
How this product differs from nearby alternatives
| Option | Main upside | Main tradeoff | Where to evaluate deeper |
|---|---|---|---|
| Variable mortgage | Potential long-run cost advantage with flexibility | Payment and trigger uncertainty | Prime-rate and variable hub |
| Fixed mortgage | High payment certainty through term | Often higher break-cost exposure | Fixed mortgage product page |
| Switch-at-renewal strategy | Can reduce penalty friction by timing decisions at maturity | May delay savings if current structure is weak | Refinance vs renew vs switch |
7-day variable mortgage readiness checklist
- Run payment, trigger-rate, and rate-comparison scenarios using your actual household numbers.
- Set a written max monthly payment threshold and conversion decision rule.
- Confirm prepayment privileges and contract conversion terms before commitment.
- Align a pre-approval backup path so your approval flexibility stays intact.
Best next step
- Run the trigger-rate calculator and define your risk threshold.
- Run rate comparison scenarios for base and stress cases.
- Create your free account to save your scenario set.
- Start pre-approval and keep a backup path ready.
