Can You Switch Mortgage Types After You’ve Signed?
When most people take out a mortgage—whether they’re buying their first home, relocating to Alberta, or investing in a rental—they’re asked to make a major choice: fixed or variable? It’s a big decision, but often one made under pressure and with limited context. A few years down the line, especially as interest rates shift, many homeowners start wondering: Can I switch from a fixed to a variable mortgage, or from a variable to fixed?
The answer is yes—but the path depends on where you are in your mortgage term, what’s happening in the market, and what you’re hoping to achieve.
Fixed vs. Variable: What’s the Real Difference?
Fixed-rate mortgages lock in your interest rate and monthly payment for a set number of years. Predictable, simple, stable.
Variable-rate mortgages fluctuate with the Bank of Canada’s prime rate. This means your interest rate (and potentially your payment) can go up or down over time.
For Alberta homeowners and investors, both have their place. Fixed gives peace of mind. Variable can offer savings—especially when rates fall. But when the market turns or your financial picture changes, that original choice might not fit anymore.
Switching from Fixed to Variable
Changing from a fixed to a variable rate means breaking your mortgage. This typically comes with a penalty, and in fixed-rate mortgages, that penalty is the greater of:
Three months’ interest
Interest Rate Differential (IRD), which compares your original rate to current market rates
IRD penalties can be significant—especially if rates have dropped since you signed. That’s why most people don’t switch from fixed to variable unless:
They’re already refinancing (for renovations, debt consolidation, or a better rate)
They’re converting to a new product, such as a longer term or a different structure
They’re willing to add the penalty to the new mortgage amount
If you’re staying with your current lender, some will reduce the penalty, but that varies. Still, for most Albertans, this switch only makes sense as part of a larger refinance plan.
Switching from Variable to Fixed
This is far more common—and often much easier.
Most variable-rate mortgages in Canada allow you to lock in at any time without paying a penalty, as long as you stay with the same lender. But there are a few key things to keep in mind:
You can only lock in at current fixed rates, not the fixed rate you were originally offered
You must choose a term that’s equal to or longer than what’s left in your mortgage term
Your lender might not offer the best fixed rate available in the market—shopping around may still be worthwhile at renewal
Common Misunderstanding
A lot of people assume that when they lock in, they’re locking in at the fixed rate they were originally offered. That’s not the case. If you signed your variable mortgage three years ago and passed on a 2.5% fixed rate back then, you won’t get that rate now. You’ll get whatever the lender’s current 2-, 3-, or 5-year fixed rate is today.
Why It Matters Right Now in Alberta
In 2022 and 2023, Alberta homeowners were locking in left and right. Interest rates were rising fast, and those with variable-rate mortgages wanted the security of fixed payments.
Now, in 2025, the Bank of Canada has already made one rate cut—and more are expected. That’s changing how people think about their mortgages:
Locking in today could mean locking in at a higher rate just as variable rates are starting to fall
Many Albertans are holding off, riding the wave of lower variable payments for now
The decision to lock in is more about risk tolerance and timing than anything else
Fixed and Variable Rates Don’t Move Together
This is where a lot of confusion happens. Just because the Bank of Canada is cutting rates (which impacts variable mortgages) doesn’t mean fixed rates are also going down.
Here’s why:
This means that even if variable rates are falling, fixed rates might hold steady or increase, especially if bond yields react differently to global economic news.
What If You’re Renewing?
If your mortgage is up for renewal, you’re in the best position to make a change. There are no penalties at renewal, and you can switch between fixed and variable or even to a new lender entirely.
That’s when many Albertans consider moving from a 5-year fixed into a shorter term—like a 2- or 3-year fixed—so they can re-evaluate when rates stabilize. Others take this opportunity to invest in a secondary market, build a home, or buy property for a family member.
Thinking About a Change? Let’s Talk Through It
At Merge Mortgage Group, we help clients across Alberta—and across Canada—make confident mortgage decisions. Whether you’re restructuring your mortgage, moving from BC or Ontario, or just trying to figure out what works best for your current financial plan, we’re here to walk through it with you.
Let’s find out if switching your mortgage type is the right move—or if another strategy might be a better fit.
