Skip to content
MasterMath

Fixed vs Variable Mortgage Calculator

Compares what you end up paying on a fixed-rate mortgage and on a variable one, with the rate review after the introductory period. It is a scenario, not a forecast: nobody knows the future index.

Currency and number format for

Difference between the two

—

Difference between the two—
Fixed-rate payment—
Variable payment, first period—
Variable payment after review—
Total paid on the fixed rate—
Total paid on the variable rate—

How this was worked out

    The formula

    Payment = capital × i / (1 − (1 + i)⁻ⁿ), with a different i in each period

    Where it comes from

    Both mortgages use the French system, the one with a constant payment. The difference is that the variable gets reviewed: through the introductory period it pays the starting rate, and after that the payment is recalculated on whatever balance is left at the new rate. That recalculation on the outstanding balance is the part almost no comparison gets right, and it is what decides the answer.

    How to work it out by hand

    1. Work out the fixed-rate payment for the whole term
    2. Work out the variable payment at the starting rate
    3. When the introductory period ends, recalculate the payment on the outstanding balance at the new rate
    4. Add up all the payments on each side and compare

    What is worth knowing

    The number here depends entirely on the rate you put in for after the review, and that is precisely the one nobody knows. What is useful is not the figure but the question it answers: above what future rate does the variable stop paying off. Try several values and you will find the threshold. And note: a variable with a long fixed introductory period behaves much more like a fixed mortgage than a variable one for quite a few years.

    Frequently asked questions

    Does this predict what will happen?

    No. It is a scenario: you set the future rate and the calculator says what would follow. Nobody knows where the index will be in twenty years.

    Why does the payment rise after the review, not just the interest?

    Because the payment is recalculated on the outstanding balance and the remaining term. That is what a real review does.

    What rate should I put for the later period?

    Try several. What matters is finding the rate above which the variable stops paying off: that is your decision threshold.

    Does it include fees and insurance?

    No. For total cost with fees, use the nominal-to-APR calculator, which is the figure comparable across offers.

    What about tracker or hybrid mortgages?

    They are exactly this case with a long introductory period: enter the fixed years as the introductory period.