Mortgage Blog
Solution Based Lending
Thinking of Locking in Your Variable Rate? Read This First.
May 1, 2025 | Posted by: Dion Williams
When interest rates start climbing and the economy feels uncertain, it’s common to see homeowners with variable-rate mortgages rushing to lock into a fixed term. On the surface, it makes sense—fixed payments offer peace of mind, protect your budget, and eliminate the guesswork. But before you make the switch, it’s important to understand the full picture.
Many homeowners choose a variable-rate mortgage knowing there's some level of risk involved. In exchange for that risk, they typically benefit from lower rates over time and greater flexibility. One of the biggest advantages? If you ever need to break your mortgage early, the penalty on a variable rate is usually just three months’ interest—much less than the often-hefty fees attached to fixed-rate terms.
Now, here’s where things get tricky. If you decide to lock into a fixed rate today and interest rates drop tomorrow (which they can), you might find yourself stuck with a higher monthly payment. Getting out of that fixed term to take advantage of lower rates can be expensive and may involve another penalty.
So, what’s the alternative? One strategy to consider is a shorter fixed term—say, 1 to 3 years. This gives you some short-term payment stability while keeping the door open for rate changes down the road. Just keep in mind: shorter terms often come with slightly higher rates, so you’ll want to weigh the cost of flexibility against your monthly budget.
Bottom line—locking in your variable rate isn’t a one-size-fits-all decision. It requires careful consideration, a look at your short- and long-term goals, and some good old-fashioned number crunching.
That’s where I come in. If you’re thinking about locking in or just want to run through your options, I’d be happy to help. Let’s break down the numbers and make sure you’re making the move that makes the most sense for your situation.
