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Quick answer: A cheaper variable rate can be worth taking if your budget can absorb increases. For an uninsured $500,000 mortgage amortized over 25 years, the best quoted 5-year variable rate of 4.04% costs $2,640.95 a month, versus $2,876.79 at the 4.89% fixed rate, using rates as of August 28, 2026.
The starting gap is $235.84 a month. That is useful breathing room, but it is not a forecast or a guaranteed saving. You are accepting uncertainty in exchange for the lower payment today.
The practical test: Do not choose variable only because 4.04% is less than 4.89%. Choose it only if you could still carry the payment at 4.89% or above without relying on the rate staying low.
How much cheaper is the variable mortgage payment?
The comparison below uses the best quoted uninsured 5-year rates in the rates facts pack: 4.04% variable and 4.89% fixed, both as of August 28, 2026. These are comparison rates, not guaranteed offers. Your rate depends on the property, transaction and application.
| Option | Rate as of Aug. 28, 2026 | Monthly payment | 60 payments if rate never changes | Balance after 60 payments |
|---|---|---|---|---|
| 5-year variable, uninsured | 4.04% | $2,640.95 | $158,457.26 | $435,572.35 |
| 5-year fixed, uninsured | 4.89% | $2,876.79 | $172,607.67 | $441,768.71 |
| Variable difference | 0.85 percentage points lower | $235.84 less | $14,150.41 less | $6,196.36 less owing |
The 60-payment variable figures are a constant-rate scenario, not a prediction. They show what happens only if 4.04% does not change. Under that scenario, you make $14,150.41 less in payments and owe $6,196.36 less after 60 monthly payments. The interest paid is $94,029.61 on variable versus $114,376.38 on fixed.
How was the mortgage payment calculated?
Canadian mortgage rates are quoted with semi-annual compounding. I converted each annual quoted rate, j, to its equivalent monthly rate:
Monthly rate = (1 + j / 2)2/12 – 1
Then I used 300 monthly payments for the 25-year amortization:
Payment = $500,000 × monthly rate / [1 – (1 + monthly rate)-300]
At 4.04%, the equivalent monthly rate is 0.3338675%, producing a $2,640.95 payment. At 4.89%, it is 0.4034096%, producing a $2,876.79 payment. Payments are shown to the cent so you can audit the comparison; a lender’s actual schedule can differ slightly because of payment dates and rounding.
How far can the variable rate rise before its payment exceeds the fixed payment?
The immediate payment crossover is 4.89%. Starting at 4.04%, the variable rate has room to rise by 0.85 percentage points before a freshly calculated payment on the same $500,000 balance and 25-year amortization reaches $2,876.79. Above 4.89%, that recalculated variable payment is higher than the fixed payment.
That is a payment crossover, not a break-even forecast. Timing matters. If variable stays at 4.04% for a while before rising, its early savings and faster principal reduction do not disappear. If it rises quickly, those savings are smaller. There is no single later rate that proves which choice costs less over the whole term without specifying every rate change and its date.
What does today’s prime rate tell you?
The prime rate in the macro facts pack was 4.45% as of August 28, 2026. That date matters because variable mortgage pricing can move after the lender changes its prime rate. The 4.04% effective variable quote is the number used for this payment comparison; the 4.45% prime figure is context, not the mortgage rate entered into the formula.
A lower starting payment gives you options. You could keep the difference in your monthly budget, build a cash reserve, or voluntarily pay at the fixed-payment level if your mortgage terms allow it. But do not count voluntary extra payments as guaranteed savings until you confirm the prepayment terms in the commitment.
When should you not take the cheaper variable rate?
Variable is a poor fit when a higher payment would force you to use credit, cut essentials or lose sleep. The fixed payment buys certainty. That can be worth $235.84 a month in this example.
The headline rate is also not the whole mortgage. Compare restrictions, prepayment options, portability and the cost of leaving early. A rate that is lower today can still be the wrong contract for your plans.
Finally, this example is uninsured. Do not mix it with insured pricing. The facts pack listed different insured rates as of August 28, 2026, and your application may not qualify for the lowest quote in either category.
Frequently asked questions
Is a variable rate better just because it starts lower?
No. The lower rate reduces your payment today, but the better choice depends on whether you can carry increases and whether the mortgage contract fits your plans.
What is the monthly saving on a $500,000 mortgage?
Using uninsured 5-year rates of 4.04% variable and 4.89% fixed as of August 28, 2026, the starting payments are $2,640.95 and $2,876.79. Variable starts $235.84 a month lower.
At what variable rate does the payment match the fixed option?
On the same balance and remaining amortization, the payment matches when the variable rate reaches 4.89%. That is 0.85 percentage points above the 4.04% starting rate used here.
Does a 4.89% crossover mean fixed will cost less?
Not by itself. It only means the variable payment at that point matches the fixed payment. Total cost depends on when rates change, the balance at each change and how you use the early payment savings.
Are these rates guaranteed for every Alberta homeowner?
No. They are best quoted uninsured comparison rates from the facts pack as of August 28, 2026. Approval and pricing depend on the application and property.
Want to compare the contracts as well as the payments? Book a call with Josh, or start an application so the numbers can be matched to your situation.
Book a 20-minute call Apply onlineThis is commentary, not advice. Rates and figures as of August 28, 2026. Payment calculations prepared September 3, 2026.
