Canada offers more mortgage types than most borrowers realize. Understanding your options can save you thousands of dollars over the life of your mortgage and help you choose the right structure for your financial situation.
Master comparison of Canadian mortgage types
| Mortgage Type | Rate Structure | Key Feature | Best For |
|---|---|---|---|
| Fixed-rate | Locked for term | Payment certainty | Risk-averse borrowers |
| Variable-rate (VRM) | Fluctuates with prime | Lower starting rate, static payment | Rate-savvy borrowers |
| Adjustable-rate (ARM) | Fluctuates with prime | Payment changes with rate | Borrowers who want transparency |
| Convertible | Starts variable or short-term fixed | Can lock in mid-term | Undecided borrowers |
| Hybrid / combination | Part fixed, part variable | Diversified rate exposure | Borrowers who want both |
| Open | Fixed or variable | Prepay any amount, no penalty | Short-term needs, expecting lump sum |
| Closed | Fixed or variable | Lower rate, prepayment limits | Most borrowers |
| Conventional | 20%+ down payment | No mortgage insurance required | Buyers with larger down payments |
| High-ratio | Less than 20% down | Requires CMHC insurance | First-time buyers |
| Insured | Default insurance in place | Lowest rates available | Under 20% down or insurable purchases |
| Insurable | Qualifies for insurance | Near-lowest rates | Under $1M, 25-year amortization |
| Uninsurable | Cannot be insured | Higher rates | Refinances, 30-year amortization, $1M+ |
| Collateral | Registered for more than owed | Borrow more without re-registering | Borrowers who want future flexibility |
| Readvanceable | HELOC + mortgage combined | Access equity as you pay down | Homeowners who want ongoing credit access |
| Reverse | No monthly payments | Borrow against equity, repay later | Homeowners 55+ |
| Portable | Transfer to new property | Avoid breaking penalty when moving | Borrowers who may relocate |
| B-lender | Higher rate | Flexible qualification | Self-employed, lower credit |
| Private | Highest rate | Minimal qualification | Borrowers declined elsewhere |
Fixed-rate mortgages
A fixed-rate mortgage locks your interest rate for the entire term, typically 1 to 5 years. Your payment stays exactly the same regardless of what happens with interest rates in the broader market.
Fixed rates are determined by Government of Canada bond yields, not the Bank of Canada overnight rate. When bond yields rise, fixed mortgage rates rise. When they fall, fixed rates follow.
When to choose fixed
- You want absolute payment certainty and budget predictability
- You believe interest rates will rise during your term
- You have a tight budget with little room for payment increases
- You plan to hold the mortgage for the full term (breaking a fixed mortgage is expensive)
Pros and cons
| Pros | Cons |
|---|---|
| Payment never changes | Higher starting rate than variable |
| Easy to budget | Expensive IRD penalty to break |
| Protected from rate hikes | No benefit if rates fall |
| Simple to understand | Less flexibility overall |
Variable-rate mortgages
A variable-rate mortgage is priced as a discount (or premium) to the lender’s prime rate. When the Bank of Canada changes its overnight rate, the prime rate adjusts, and your mortgage rate changes with it.
There are two types of variable mortgages:
- Variable-rate mortgage (VRM): Your payment stays the same, but the split between principal and interest changes. If rates rise, more goes to interest and less to principal. This can trigger a “trigger rate” — the point where your payment no longer covers the interest.
- Adjustable-rate mortgage (ARM): Your payment changes whenever the rate changes. You always know exactly how much is going to principal vs interest.
When to choose variable
- You can tolerate payment uncertainty
- You believe rates will stay flat or decline
- You may break your mortgage early (variable penalties are much lower)
- You have financial room to absorb potential payment increases
VRM vs ARM comparison
| Feature | VRM (Variable Rate) | ARM (Adjustable Rate) |
|---|---|---|
| Payment amount | Stays the same | Changes with rate |
| Principal repayment | Fluctuates | Consistent amortization |
| Trigger rate risk | Yes | No |
| Offered by | TD, CIBC, most banks | Scotia, National Bank, some lenders |
| Transparency | Less clear | More clear |
Open vs closed mortgages
Open mortgages
An open mortgage allows you to pay off any amount — including the entire balance — at any time without penalty. The trade-off is a significantly higher interest rate, typically 1.00%–2.00% above comparable closed rates.
Open mortgages make sense if you are expecting a large sum of money (inheritance, home sale proceeds, bonus) or plan to pay off your mortgage within a year.
Closed mortgages
A closed mortgage offers a lower rate but restricts extra payments. Most closed mortgages allow annual prepayments of 10%–20% of the original balance and payment increases of 10%–20%, but anything beyond that triggers a penalty.
Most Canadians choose closed mortgages because the rate savings more than compensate for the prepayment restrictions.
| Feature | Open | Closed |
|---|---|---|
| Interest rate | Higher (1–2% premium) | Lower |
| Prepay any amount | Yes, no penalty | Limited to prepayment privileges |
| Penalty to break | None | 3 months interest (variable) or IRD (fixed) |
| Best for | Short-term, expecting lump sum | Most borrowers |
| Available terms | Usually 6 months to 1 year | 1 to 10 years |
Conventional vs high-ratio mortgages
The 20% down payment threshold divides the entire Canadian mortgage market into two categories.
Conventional mortgage (20%+ down)
- No mortgage default insurance required
- Access to 30-year amortization
- Can purchase properties over $1 million with standard financing
- Slightly higher rates in some cases (uninsurable)
High-ratio mortgage (less than 20% down)
- Must purchase CMHC, Sagen, or Canada Guaranty mortgage insurance
- Insurance premium ranges from 2.80% to 4.00% of the mortgage amount
- Maximum 25-year amortization (unless using insured 30-year programs where available)
- Purchase price capped at $999,999 for insured mortgages
- Often qualifies for the lowest rates because the insurance removes the lender’s risk
Mortgage insurance premium schedule
| Down Payment | Insurance Premium |
|---|---|
| 5.00%–9.99% | 4.00% |
| 10.00%–14.99% | 3.10% |
| 15.00%–19.99% | 2.80% |
| 20%+ | Not required |
For a $500,000 home with 5% down ($25,000), the insurance premium is $475,000 × 4.00% = $19,000, added to your mortgage balance. Read more about CMHC insurance costs.
Specialty mortgage types
Collateral mortgages
A collateral mortgage registers a charge on your property for more than you actually owe — often 125% of your home’s value. This allows you to borrow additional funds later (via a line of credit, for example) without paying for a new appraisal or registration.
The downside: collateral charges cannot be assigned to a new lender the way conventional charges can. Switching lenders means discharging and re-registering, which costs $1,000–$2,000 in legal fees. TD and Tangerine use collateral mortgages by default. Learn more in our collateral vs conventional mortgage guide.
Readvanceable mortgages
A readvanceable mortgage combines your mortgage with a home equity line of credit (HELOC). As you pay down your mortgage principal, that amount becomes available as a credit line — giving you ongoing access to your equity without refinancing.
This structure is useful for the Smith Manoeuvre (borrowing to invest and making mortgage interest tax-deductible) or for homeowners who want flexible access to equity for renovations or other purposes.
Convertible mortgages
A convertible mortgage lets you switch from a variable rate to a fixed rate (or from a short fixed term to a longer one) during your term without paying a penalty. The catch is that the fixed rate you receive is typically the lender’s posted rate at the time of conversion, not a competitive discounted rate.
Hybrid / combination mortgages
A hybrid mortgage splits your total mortgage into multiple components — part fixed and part variable. For example, 60% at a 5-year fixed rate and 40% at a 5-year variable rate. This gives you diversified rate exposure, similar to a balanced investment portfolio.
Reverse mortgages
A reverse mortgage allows homeowners aged 55 and older to borrow against their home equity without making monthly payments. The loan, plus accumulated interest, is repaid when you sell, move out, or pass away.
- Maximum borrowing: Up to 55% of home value (depends on age and location)
- Main providers: HomeEquity Bank (CHIP Reverse Mortgage) and Equitable Bank
- Rates: Typically 1%–2% above conventional mortgage rates
- No monthly payments required — interest compounds on the outstanding balance
Reverse mortgages are not for everyone, but they can be a valuable tool for asset-rich, cash-poor retirees who want to age in place. Read our complete reverse mortgage guide.
Alternative lending: B-lenders and private mortgages
B-lender mortgages
B-lenders (also called alternative lenders) serve borrowers who do not qualify with major banks. Common reasons include self-employment income, lower credit scores (under 650), recent credit events, or non-standard properties.
- Rates: 0.50%–2.00% above A-lender rates
- Terms: Often 1–2 years (shorter than conventional 5-year terms)
- Fees: May include lender fees of 0.50%–1.00% of the mortgage amount
- Examples: Home Trust, Equitable Bank (alt channel), CMLS, First National (Excalibur)
Read our detailed B-lender mortgage guide.
Private mortgages
Private lenders are the option of last resort. They fund mortgages based almost entirely on the property value and equity, with minimal income or credit verification.
- Rates: 7%–15%+
- Terms: Usually 1 year
- Fees: 2%–5% lender fee plus broker fees
- Best for: Bridge financing, temporary situations, borrowers actively rebuilding credit
Which mortgage type is right for you?
Choosing the right mortgage depends on your financial situation, risk tolerance, and plans. Here is a decision guide:
If you plan to stay 5+ years and want predictability → Fixed-rate closed mortgage. You get a competitive rate, stable payments, and no surprises.
If you want the lowest rate and can handle fluctuation → Variable-rate closed mortgage. Historically, variable rates have saved Canadian borrowers money more often than not.
If you might break your mortgage early → Variable-rate (lower penalty) or an open mortgage if you are certain you will pay off within a year.
If you are buying with less than 20% down → High-ratio insured mortgage. You will pay an insurance premium but often qualify for the lowest rates available.
If you are self-employed or have credit challenges → B-lender mortgage to start, with a plan to qualify for an A-lender at renewal.
If you are 55+ and need cash flow → Consider a reverse mortgage to access equity without monthly payments.
If you want ongoing access to equity → Readvanceable mortgage with HELOC component.
If you cannot decide between fixed and variable → Hybrid mortgage that splits the difference.
The Bottom Line
Canada’s mortgage market offers far more variety than the basic fixed-vs-variable choice. Understanding the full range of options — from open and closed structures to collateral charges, readvanceable mortgages, and alternative lending — helps you choose the product that genuinely fits your situation rather than defaulting to whatever your bank offers first.
The best approach is to work with a mortgage broker who can access multiple lenders and match you with the right mortgage type. Start by understanding your priorities (rate certainty vs flexibility vs lowest cost) and build from there.