Canadian Variable Rate Mortgage Calculator
Calculate your variable rate mortgage payment, trigger rate, and comparison to the 5-year fixed alternative. Includes trigger rate calculation and how close you are to hitting it, prime rate scenarios showing payments at ±0.5%, ±1%, and ±2%, explanation of static payment versus adjustable payment variable mortgages, Bank of Canada prime rate history from 2015 to 2026, and break penalty comparison showing the variable rate's major exit cost advantage.
The trigger rate is the interest rate at which your fixed monthly payment no longer covers the interest charges — meaning none of your payment reduces the principal. If rates rise above the trigger rate, your amortization extends and you may owe more than you originally borrowed (negative amortization).
Trigger Rate = (Monthly Payment ÷ Loan Balance) × 12 × 100
Your figures:
Monthly Payment: CA$2,612
Loan Balance: CA$500,000
Trigger Rate: 6.27%
Current Rate: 3.90%
Rate Headroom: +2.37%
The Bank of Canada prime rate from 2015 to 2026. Understanding the historical range helps put current rates in context.
| Year | BoC Prime Rate | Variable at Prime -0.8% | 5yr Fixed Approx | Variable Advantage |
|---|---|---|---|---|
| 2015 | 2.70% | 1.90% | 3.90% | +2.00% |
| 2016 | 2.70% | 1.90% | 3.90% | +2.00% |
| 2017 | 3.20% | 2.40% | 4.40% | +2.00% |
| 2018 | 3.95% | 3.15% | 5.15% | +2.00% |
| 2019 | 3.95% | 3.15% | 5.15% | +2.00% |
| 2020 | 2.45% | 1.65% | 3.65% | +2.00% |
| 2021 | 2.45% | 1.65% | 3.65% | +2.00% |
| 2022 | 6.45% | 5.65% | 7.65% | +2.00% |
| 2023 | 7.20% | 6.40% | 8.40% | +2.00% |
| 2024 | 5.45% | 4.65% | 6.65% | +2.00% |
| 2025 | 4.95% | 4.15% | 6.15% | +2.00% |
| 2026 (now) | 4.70% | 3.90% | 5.90% | +2.00% |
How to Use This Canadian Variable Rate Mortgage Calculator
Enter your loan amount, prime rate discount or premium (e.g. −0.80 for prime minus 0.80%), amortization period, and the 5-year fixed rate you have been offered for comparison. The calculator shows your current variable rate payment, your trigger rate, the rate headroom before the trigger is hit, and a comparison with the 5-year fixed alternative.
What is a Canadian Variable Rate Mortgage?
A variable rate mortgage in Canada has an interest rate that fluctuates with the Bank of Canada (BoC) prime rate. When the BoC raises or lowers its overnight rate, major bank prime rates follow, and your variable mortgage rate changes accordingly. Variable rates are typically quoted as "prime minus X%" — for example, prime − 0.80% means your rate is 0.80% below the bank's prime lending rate at any given time.
The Trigger Rate Explained
Trigger Rate = (Monthly Payment ÷ Loan Balance) × 12 × 100
Example:
Loan: $500,000 | Amortization: 25yr | Rate: 3.90%
Monthly Payment: $2,600/mo
Trigger Rate = ($2,600 ÷ $500,000) × 12 × 100 = 6.24%
If prime rises to 7.04% (prime − 0.80% = 6.24%):
→ Your payment covers interest only — no principal reduction
→ If rates rise further: negative amortization begins
→ Lender will require payment increase or lump sum
The trigger rate is particularly relevant for static-payment variable rate mortgages (VRM), where your payment stays the same as rates change. For adjustable-payment mortgages (ARM), there is no trigger rate because the payment adjusts immediately when the prime rate changes.
Static Payment vs Adjustable Payment Variable Mortgages
Canadian variable rate mortgages come in two fundamentally different structures:
- Adjustable-Payment Variable Rate Mortgage (ARM): Your monthly payment changes directly and immediately when the prime rate changes. When rates rise, you pay more each month. When rates fall, you pay less. There is no trigger rate risk. Lenders offering this include TD Bank and Scotiabank.
- Static-Payment Variable Rate Mortgage (VRM): Your monthly payment stays fixed regardless of rate changes. When rates rise, more of your payment goes to interest and less to principal — the amortization extends. If rates rise far enough to hit the trigger rate, the payment no longer covers interest and negative amortization occurs. Lenders offering this include RBC and CIBC.
During the 2022–2023 rate hiking cycle, many Canadians with static-payment VRMs hit their trigger rates as prime rose from 2.45% to 7.20% in 18 months. This caused significant payment shock as lenders required immediate payment increases.
Example: $500,000 Variable Rate Mortgage
Priya takes a variable rate mortgage in Toronto
Priya borrows $500,000 at prime − 0.80%. Current prime is 4.70%, so her rate is 3.90% and her monthly payment on a 25-year amortization is $2,600.
| Loan Amount | $500,000 |
| Rate | 3.90% (prime 4.70% − 0.80%) |
| Monthly Payment (25yr) | $2,600/mo |
| 5-Year Fixed Alternative | $2,740/mo at 5.19% |
| Monthly Saving vs Fixed | $140/mo = $1,680/yr |
| Trigger Rate | 6.24% (prime needs to reach 7.04%) |
| Variable Break Penalty | ~$5,850 (3-month interest) |
| Fixed Break Penalty (est.) | $12,000–$25,000+ (IRD) |
Priya saves $140 per month versus a 5-year fixed rate. Her trigger rate requires prime to rise another 2.34% before hitting. And if she needs to break her mortgage early, her variable penalty is a fraction of what a fixed mortgage would cost.