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Understanding Adjustable-Rate Mortgages: A Comparative Analysis

General Angela Calla 23 Jan

As part of our commitment to keeping you informed about mortgage options, we wanted to share important insights on Adjustable-Rate Mortgages (ARMs) and how they compare to other mortgage types.

Below is a summary of key points for your consideration:

  1. What You Should Know:

ARMs have an interest rate and payment amount that can change.

If prime rates rise, your monthly ARM payment will increase.

If prime DECREASES your monthly payment would Decrease ( improving cashflow)

The principal payment is fixed, ensuring your amortization stays on schedule.

A 0.50% increase in interest rates would raise the monthly payment of a $500,000 mortgage by roughly $100, this works the same way for a decrease.


  1. How Do Adjustable-Rate Mortgages Work?

ARM rates change based on the prime rate.

An increase in interest rates results in immediate higher interest payments.

Monthly payments increase, OR decrease impacting budgeting and planning.


  1. Comparing Variable Rate vs. Adjustable Rate Mortgages:

Variable rate mortgages have a fixed monthly payment, leading to potential challenges if interest rates rise. ( think Trigger Rates reached in 2022)

Adjustable rate mortgages allow for changes in the interest payment while keeping the principal payment fixed.


  1. Mortgage Trigger Rate: read here

A trigger rate can cause a sudden increase in payments for variable-rate mortgages.

Adjustable-rate mortgages adjust payments to maintain consistent principal payments.

See the videos here from CBC and Global news


Example of an Adjustable Mortgage Rate:

A $500,000 mortgage with a 0.50% increase in the prime rate can raise monthly payments by $100.


  1. 2022 Scenario:

Bank of Canada’s rate hikes in 2022 increased prime rates from 2.45% to 6.45%.

For a $500,000 mortgage, monthly payments could rise by approximately $1,107.

Prime Jan 2024 is sitting at 7.2% making that monthly payment now approx. $ 1,220.00


  1. Why Choose an Adjustable Mortgage Rate?

Gradual payment changes. OR declines

Convertibility to a fixed rate.

Lower mortgage penalties (3 months’ interest).


  1. Is an Adjustable Mortgage Rate Right For Me?

Consider your financial situation and ability to cover potential payment increases.

Assess your tolerance for risk and willingness to adapt to changing interest rates.

These insights aim to provide clarity as you evaluate mortgage options.


If you have any questions or would like to discuss your specific situation further, please don’t hesitate to reach out. We are here to assist you in making informed decisions tailored to your needs.

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at or at 604-802-3983.

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