Term loan - Variable rate - Closed

When interest rates change with a Closed Variable Interest Rate Loan (or Mortgage), your payment amount remains the same. However, the amount applied towards interest and principal will change.

Variable closed mortgages usually have lower interest rates than fixed-rate mortgages. The rate is tied to the prime rate of the bank and is set monthly. If your interest rate decreases, more of your payment is applied to the principal. Although you cannot pay off the loan early without penalty, most variable closed mortgages can be converted into a fixed-rate mortgage if you expect interest rates to rise in the future.

The MoneyReady App provides a rough estimate of mortgage prepayment penalty. You can see the calculation if you set a sell date on the property before the mortgage is paid off. As for fixed-rate mortgages, the penalty is estimated as 3 months' interest or with a 2% interest rate differential, whichever is higher.

Changes in the prime lending rate if the future can be set in RATES/YIELDS/CURRENCIES.