Compare two offers for the same loan: one with a fixed rate and another with a variable rate that can change every year. See what would happen in different scenarios.
The preloaded values are an example: replace them with your own figures.
Estimated total difference
With these figures, in your scenario (the variable rate changes +0.50 points per year) you would pay $116.057,35 with a fixed rate and $122.590,70 with a variable rate: the cheaper option would be the fixed rate.
Variable rate scenarios
Nobody knows how rates will move. Compare what would happen if they rise, stay the same or fall 0.50 points a year.
Payment year by year
| Year | Fixed rate | Fixed payment | Variable rate | Variable payment |
|---|---|---|---|---|
| Year 1 | 10,00% | $644,76 | 8,50% | $590,84 |
| Year 2 | 10,00% | $644,76 | 9,00% | $607,65 |
| Year 3 | 10,00% | $644,76 | 9,50% | $623,77 |
| Year 4 | 10,00% | $644,76 | 10,00% | $639,12 |
| Year 5 | 10,00% | $644,76 | 10,50% | $653,64 |
| Year 6 | 10,00% | $644,76 | 11,00% | $667,28 |
| Year 7 | 10,00% | $644,76 | 11,50% | $679,95 |
| Year 8 | 10,00% | $644,76 | 12,00% | $691,59 |
| Year 9 | 10,00% | $644,76 | 12,50% | $702,11 |
| Year 10 | 10,00% | $644,76 | 13,00% | $711,43 |
| Year 11 | 10,00% | $644,76 | 13,50% | $719,46 |
| Year 12 | 10,00% | $644,76 | 14,00% | $726,10 |
| Year 13 | 10,00% | $644,76 | 14,50% | $731,27 |
| Year 14 | 10,00% | $644,76 | 15,00% | $734,87 |
| Year 15 | 10,00% | $644,76 | 15,50% | $736,79 |
Results are for reference only and are not actual figures. Values depend on the country, the financial institution, taxes and current laws, and must be validated with an authorized financial institution. Banco.guru is an educational guide to what can be achieved; it does not offer products or personalized financial advice.
Tips for using this result
- A variable rate usually starts lower: the risk is that it goes up.
- Ask how often the rate is reviewed and which index it is tied to.
- If your budget can’t handle a 2–3 point increase, a variable rate is risky for you.
- Some loans are hybrid: fixed for a few years and variable afterwards.
What is the difference between a fixed and a variable rate?
With a fixed rate, the interest rate does not change during the agreed term: your payment is predictable. With a variable rate, the rate is reviewed periodically based on a reference index plus a margin; if the index rises, your payment rises, and if it falls, your payment falls.
How does this simulator work?
It calculates the fixed-rate payment for the whole term and, for the variable rate, recalculates the payment every year using the outstanding balance and the new rate (initial rate ± the annual change you enter, with an optional cap). It then compares the total paid in both cases and shows three scenarios for the variable rate: if it rises, stays the same or falls.
When might each one make sense?
- Fixed rate: if you value stability, your budget is tight or the term is long.
- Variable rate: if you have room to absorb increases, expect rates not to rise or plan to prepay soon.
- Hybrid: combines an initial fixed period with a variable one; check carefully what happens when the fixed period ends.
The key question: how much risk can you take on?
Nobody can predict rates. So rather than guessing, ask yourself: if the variable rate rises several points, could I keep paying without problems? Use the “annual change” field to stress-test the scenario. If the maximum payment doesn’t fit your budget, the stability of a fixed rate is worth more.
Learn more in our guide fixed vs. variable rate: differences and who each one suits.
Frequently asked questions
Is a variable rate always cheaper?
No. It usually starts lower, but if reference rates rise, it can end up costing more than a fixed rate.
What is a rate cap?
It is a maximum limit the variable rate cannot exceed, if the contract includes one. It reduces the risk of sharp increases.
Can I switch from a variable to a fixed rate?
It depends on the contract and the institution. Some allow you to renegotiate or refinance, sometimes at a cost.
Which scenario should I use?
Try several: stable, a moderate increase and a sharp increase. Decide based on the unfavorable scenario you could withstand.
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