Understanding the types of mortgages available in Calgary before you talk to a lender puts you in control of the conversation. Fixed or variable. Open or closed. Split, portable, convertible. The mortgage type you choose affects your payment, your flexibility, your penalty exposure, and how fast you pay off your home. Every type explained plainly — with Calgary context throughout.
Most Calgary buyers focus almost entirely on getting the lowest rate. Rate matters — but the type of mortgage you choose can have an equal or greater financial impact. The wrong structure can cost you tens of thousands in prepayment penalties when you sell, limit your ability to make extra payments, or trap you in a rate when rates fall.
The right mortgage depends on your financial situation, how long you plan to stay in the home, your risk tolerance, and what flexibility you need. There is no universally correct answer — which is why the conversation with your Calgary mortgage broker matters so much, and should happen before you start shopping for homes.
This guide is educational — not advice specific to your situation. For personalised advice, talk to Calgary mortgage broker Al Zayat.
Not sure which type is right for you? Al Zayat will give you a straight answer.
Book a Free Mortgage ConsultationA fixed rate mortgage locks your interest rate for the entire term — typically 1, 2, 3, or 5 years. Your payment never changes during the term regardless of what happens to interest rates. At the end of the term you renew at whatever rate is then available.
You know exactly what your payment will be for the full term. If rates rise after you lock in, you are protected. Fixed rates are particularly valuable for first-time buyers stretching their budget, and for anyone who cannot absorb payment increases mid-term.
Fixed rate mortgages typically use the Interest Rate Differential (IRD) as the prepayment penalty when you break the mortgage before the term ends — such as when selling. The IRD equals the difference between your rate and the rate the lender can now offer for your remaining term, multiplied by your outstanding balance and remaining months. In a period of falling rates, IRD penalties can be enormous — $15,000, $25,000, or more. Always get a written payout statement from your lender before listing your home.
The 5-year fixed is the most common choice in Canada — longest certainty window and historically competitive rates. Shorter terms (1–3 years) offer more flexibility to renegotiate sooner. If you expect to sell within 3 years, a shorter term may limit your penalty exposure.
Greater of: 3 months' interest OR Interest Rate Differential (IRD). In falling rate environments, IRD is almost always the larger amount — and can be very large.
A variable rate mortgage is tied to your lender's prime rate, which moves with the Bank of Canada's overnight rate. In a true variable rate mortgage, your payment amount stays the same — but the split between interest and principal changes with the rate. If rates rise significantly, more of your payment covers interest and your amortization extends.
Studies consistently show that variable rate borrowers have paid less interest than fixed rate borrowers over most multi-decade periods — variable rates track the Bank of Canada's overnight rate, which has generally averaged below fixed rates. Past performance does not guarantee future results, and there are periods where fixed rates win.
The prepayment penalty for breaking a variable rate mortgage is almost always just three months' interest — significantly lower than the IRD on a fixed rate. For Calgary sellers who are uncertain how long they will stay in a home, this flexibility has real financial value. If you sell two years into a 5-year term, the variable penalty could be $3,000–$6,000 vs $20,000+ on a fixed.
If rates rise sharply — as they did in 2022–2023 — your effective rate increases and more of your payment goes to interest. In extreme cases your payment may not cover the interest accruing, leading to negative amortization where your balance actually increases. Always stress-test your budget at your rate plus 2% before choosing variable.
3 months' interest only — much lower than fixed IRD penalties. A significant advantage for buyers who may sell before the term ends.
In Canada these terms are used interchangeably but they refer to different structures. The distinction matters.
Variable rate: Your payment stays fixed. When rates change, the split between principal and interest changes — but your payment amount does not. If rates rise significantly, your amortization extends beyond the original term.
Adjustable rate (ARM): Your payment adjusts automatically when prime changes. If the Bank of Canada raises rates by 0.25%, your payment increases to reflect it. If they cut, your payment goes down. Your amortization stays on track because the payment always covers the correct interest.
Neither is inherently better — it depends on what you want. An ARM gives you transparency — your payment always reflects the true cost and your amortization stays on schedule. A true variable gives payment stability but less visibility into your actual debt paydown. When comparing lenders, ask specifically: "Does my payment change when prime changes, or does only the principal/interest split change?" The answer tells you which structure you have.
"If prime goes up 0.25% — does my payment change, or only my interest/principal split?" The answer tells you exactly which structure you have.
A closed mortgage restricts how much you can repay outside your regular payments without triggering a prepayment penalty. In exchange for accepting these limits, the lender offers a significantly lower interest rate than an open mortgage. The vast majority of Canadian mortgages are closed.
"Closed" does not mean you cannot make extra payments — it means there are defined limits on how much extra you can pay. Most closed mortgages include prepayment privileges (see the dedicated section below) that allow meaningful extra payments within defined annual limits without penalty.
What you cannot do without penalty in a closed mortgage: sell your home and pay off the mortgage early, refinance to a different lender mid-term, or pay off the full balance before the term ends — unless you use your prepayment privileges or port the mortgage to a new property.
Closed mortgages are typically 1–2% lower in rate than equivalent open mortgages. On a $500,000 mortgage that is $5,000–$10,000 per year in interest savings. For buyers who plan to stay for the full term, the rate advantage almost always outweighs the flexibility cost.
Typically 1–2% lower than open mortgages. On $500K: $5,000–$10,000/year in interest savings compared to an open mortgage.
An open mortgage allows you to repay any portion of your mortgage at any time without penalty — including the full balance. You can sell, refinance, or pay off the mortgage whenever you choose with no financial consequence beyond the interest accrued to that date.
Open mortgages carry a significantly higher interest rate than closed mortgages — typically 1–2% higher. On a $500,000 mortgage that premium costs $5,000–$10,000 per year in additional interest. For most buyers who plan to stay in their home for a full term, an open mortgage is far more expensive than a closed mortgage with prepayment privileges.
Open mortgages are appropriate in specific situations — not as a default choice. They make sense when: you expect to sell within weeks or months, you are expecting a large lump sum that will pay off the mortgage entirely, you are in bridge financing between properties, or you have a short-term situation with uncertain payoff timing. For the vast majority of Calgary buyers, a closed mortgage with generous prepayment privileges is the better choice.
Typically 1–2% higher rate than closed. On $500K that is $5,000–$10,000 per year in extra interest. Not appropriate for most standard purchases.
None. Full prepayment at any time with no penalty. This is the defining feature — and the reason for the rate premium.
A split mortgage divides your total mortgage balance between two different rate structures — most commonly a portion at a fixed rate and a portion at a variable rate. For example: $300,000 at a 5-year fixed rate of 5.4% and $200,000 at variable (prime minus 0.5%).
A split mortgage is a hedging strategy. If rates rise, your fixed portion is protected. If rates fall, your variable portion benefits. You avoid an all-or-nothing decision when you are genuinely uncertain about rate direction and want to limit regret in either scenario.
The trade-off: you get the full benefit of neither outcome. If rates fall significantly, a 100% variable would have outperformed. If rates spike, a 100% fixed would have been cheaper. A split is the middle path — appropriate when uncertainty is genuine.
The split ratio is flexible — 50/50 is common, but 60/40 or 70/30 splits are available. Each portion has its own rate, term, and prepayment rules. Your mortgage broker structures the split based on your specific priorities.
Two portions mean two sets of terms and two penalty calculations if you break early. Worth the complexity if the hedge fits your situation.
A convertible mortgage is a variable rate mortgage that includes the contractual right to convert to a fixed rate at any time during the term — without a prepayment penalty. You start with a variable rate and can lock in whenever you choose.
A convertible mortgage lets you start with the typically lower variable rate while retaining the ability to lock in if rates rise significantly or your financial circumstances change. You are never forced to convert — it is always your choice. When you convert, you lock in at whatever fixed rate the lender is offering at that time for the term you choose.
Convertible variable rates are sometimes slightly higher than non-convertible variable rates — the option to convert has a cost. Compare specific rates carefully. The timing challenge is also real: converting at a rate peak just before rates fall can leave you worse off than staying variable. Your mortgage broker monitors rate trends and can advise on conversion timing.
A portable mortgage transfers from your current home to your new home when you move — keeping the same rate and terms from your existing mortgage and avoiding the IRD penalty that would apply if you broke the mortgage to finance the new purchase.
If you locked in a fixed rate that is below current market rates, porting keeps that advantageous rate on your new purchase rather than forcing you into today's higher rates. The combination of rate preservation and IRD penalty avoidance makes portability one of the most financially valuable mortgage features a Calgary seller can have.
When you port, the lender approves the new property under your existing mortgage terms. If your new home costs more than your existing mortgage balance, you typically need a "blend and extend" — a new portion at the current rate is blended with your existing rate across a new term. If your new home costs less, you may port a portion and pay down the difference without penalty.
Not all mortgages are portable. Portability terms vary: some lenders require the new purchase to close within 30–90 days of the sale; some restrict qualifying properties; some have balance requirements. Discovering your mortgage is not portable after accepting an offer is a very expensive surprise. Talk to Calgary mortgage broker Al Zayat about portability as part of your pre-listing strategy.
If your new home costs more than your existing mortgage, the extra amount is funded at today's rate and blended with your existing rate to create a single blended rate for a new term. Your broker calculates the exact blended rate.
Prepayment privileges are contractual rights built into most closed mortgages that allow you to pay down your mortgage faster — within defined annual limits — without triggering a prepayment penalty. They are one of the most powerful and most underused features of a Canadian mortgage.
Lump sum prepayment: The right to make one or more lump sum payments against your principal each year, up to a defined percentage of the original balance. The most common limits are 10%, 15%, or 20% of the original balance per year. On a $500,000 mortgage with 15% privileges, you can pay up to $75,000 against principal each year penalty-free.
Payment increase: The right to increase your regular scheduled payment by a defined percentage each year — typically 10–20%. Increasing your regular payment reduces your amortization by directing more money to principal every payment.
Making consistent use of prepayment privileges dramatically reduces your amortization and saves significant interest. On a $500,000 mortgage at 5.5% over 25 years, a $10,000 annual lump sum payment reduces the amortization by approximately 6 years and saves over $85,000 in interest. Switching from monthly to accelerated bi-weekly payments adds one extra monthly payment per year — reducing a 25-year amortization by approximately 3 years at no cost.
Prepayment privileges reset at year end (or your mortgage anniversary, depending on the lender). Unused privileges do not carry over. If your privilege allows $50,000 and you make $20,000 in a year, you lose the remaining $30,000 of room. Plan your extra payments accordingly.
Switch from monthly to accelerated bi-weekly payments. You make 26 half-payments per year — effectively one extra full payment per year. Reduces a 25-year amortization by approximately 3 years with no change to your lifestyle.
Direct your annual tax refund straight to your mortgage. On a $500K mortgage, a $5,000 refund applied annually saves approximately $28,000 in interest over the amortization and reduces your timeline by over 2 years.
Work bonuses and inheritances are ideal lump sum candidates. Apply before year-end so the privilege room doesn't expire. A $10,000 lump sum in year 1 of a $500K mortgage saves over $30,000 in lifetime interest.
Every renewal is an opportunity to increase your regular payment — shortening your amortization at no penalty cost. If your financial situation has improved, a payment increase at renewal has compounding impact over remaining years.
Many lenders allow you to double your regular payment on any scheduled payment date. The extra amount goes entirely to principal. Flexible — do it once or many times without committing to a permanently higher payment.
If your required payment is $2,347/month, round up to $2,500. The extra goes to principal every payment. Often not felt in daily budgeting — but the compounding impact over 25 years is meaningful.
When you take out a mortgage in Alberta, the lender registers a charge against your property at the Land Titles Office. This secures the lender's interest. There are two types of charge: conventional (standard) and collateral. The type determines your flexibility at renewal.
Registered for the exact amount of your mortgage. At renewal, you can switch to a different lender with a simple mortgage transfer — often at little or no cost, giving you real competitive leverage to negotiate the best renewal rate. Your lender knows you can leave easily, which keeps them honest.
Registered for a higher amount than your actual mortgage — often up to 125% of your home's value. This allows the lender to advance additional funds in the future (home equity line of credit, top-ups) without registering a new charge. Sounds convenient — but the trade-off matters.
Because a collateral charge is registered above the mortgage balance, a switching lender cannot simply transfer it — they must discharge it and register a new charge, which involves legal fees ($800–$1,500 out of pocket). This makes switching lenders at renewal meaningfully more expensive, reducing your bargaining power and the real competition for your business at renewal time. TD Canada Trust and many credit unions are well-known collateral charge lenders. Always ask your mortgage broker which type you are getting before signing.
"Is this a conventional or collateral charge?" Ask your broker and confirm in your mortgage commitment letter before signing anything.
Lenders regularly promote special rates — a 5-year fixed at a deeply discounted number, a variable rate promotional offer, a cash-back mortgage, or a limited-time offer that appears in a weekend flyer. These promotions are real — but they almost always come with conditions attached that affect the true cost of the mortgage. The headline rate is marketing. The full picture is in the terms.
Restricted prepayment privileges. A deeply discounted rate may come with severely limited prepayment privileges — 5% lump sum instead of 15%, or no payment increase option at all. If you plan to make extra payments, the lower rate on a restricted mortgage may cost you more in the long run than a slightly higher rate with generous privileges.
Collateral charge registration. Some promotional rates are only available when the mortgage is registered as a collateral charge — which limits your ability to switch lenders at renewal and reduces your negotiating power. You may win on rate today and lose on rate at renewal.
No portability. Certain promotional products are not portable — if you sell before the term ends, you pay the full IRD penalty with no option to transfer. If there is any chance you will move before the term ends, a non-portable rate special can be an expensive mistake.
Bona fide sale clause. Some lenders include a bona fide sale clause in their promotional mortgages — meaning you can only break the mortgage by selling the property outright. Refinancing mid-term is not permitted regardless of circumstances. This eliminates the option to refinance if rates drop significantly or your financial situation changes.
Cash-back mortgages — the true rate. Some lenders offer a lump sum of cash at closing in exchange for a higher interest rate over the term. The math on cash-back mortgages almost always favours the lender. The "free" cash costs you significantly more in interest over the term than simply taking a lower rate without the cash component. Run the numbers before assuming cash-back is a good deal.
Do not compare mortgage offers by headline rate alone. Compare the total cost of the mortgage over the term — factoring in the rate, prepayment privileges, portability, penalty structure, and charge type. A mortgage that is 0.15% higher in rate but includes 20/20 prepayment privileges, full portability, and a conventional charge registration may be worth significantly more than the cheapest rate on the board.
This is exactly the analysis a good mortgage broker performs on your behalf — across multiple lenders simultaneously. Calgary mortgage broker Al Zayat deciphers the fine print on every product, runs the true total cost comparison, and tells you plainly whether a rate special is actually a good deal for your specific situation. That analysis is free. The cost of choosing the wrong product is not.
Comparing mortgage products across all these variables is exactly what a mortgage broker does. Al Zayat runs the full comparison across multiple lenders — rate, privileges, portability, charge type, and true total cost — so you make an informed decision, not just a rate decision.
Not "what is your best rate?" but "what is the total cost of this mortgage over the term, including all restrictions?" That question changes the conversation — and the answer often changes your decision.
| Type | Rate | Payment Certainty | Penalty to Break | Best For |
|---|---|---|---|---|
| Fixed (Closed) | Higher than variable | High — never changes | IRD — can be very large | Certainty, tight budgets, rate risk averse |
| Variable (Closed) | Tracks prime rate | Medium — payment same, split varies | 3 months' interest only | Flexibility, rate optimists, uncertain timeline |
| Adjustable Rate (ARM) | Tracks prime rate | Lower — payment adjusts | 3 months' interest only | Transparency, on-track amortization |
| Open | 1–2% above closed | High (if fixed) | None | Imminent payoff, bridge financing |
| Split | Blended fixed/variable | Medium — fixed portion certain | Varies by portion | Rate uncertainty, hedging strategy |
| Convertible Variable | Slight premium over variable | Medium — variable with lock-in option | 3 months' interest (or none to convert) | Variable start, want option to fix |
| Portable | Your existing rate | Same as underlying type | Avoids penalty when moving | Sellers moving before term end |
Calgary mortgage broker Al Zayat compares products across multiple lenders, advises on the right type and term for your specific situation, and structures your mortgage to give you maximum flexibility — including portability, prepayment privileges, and the right charge registration.