Glossary
Hybrid Mortgage
Also called a blended or part-and-part mortgage, a hybrid mortgage splits your mortgage balance between a fixed rate and a variable rate..
A hybrid mortgage is a single mortgage that divides your balance into two portions: one charged a fixed rate and the other a variable rate. Lenders also call it a blended, part-and-part, or split-rate mortgage. You keep one lender, one contract, and one charge against the property, but the interest cost on each portion behaves differently.
How the split is structured
You and the lender agree on the proportion of the balance that sits in each portion — for example, most of it fixed and the remainder variable. Both portions normally share the same mortgage term and amortization and are collected as one combined payment. The fixed part behaves like a standard fixed-rate loan: the payment is set at the start and does not move. The variable part follows prime rate; depending on the product, either the payment rises and falls with prime, or the payment stays level and the amortization stretches or shortens instead.
A hybrid is not a second mortgage tacked onto a first. It is one mortgage with an internal split, which matters when you renew, refinance, or break the term.
Why borrowers choose a hybrid
- Split rate risk: part of the balance is insulated from rate moves while part can benefit if rates fall.
- Budgeting: the fixed share gives a predictable component to the payment.
- Some conversion flexibility: many lenders let you move the variable portion to the fixed rate, subject to the contract.
What to watch for
Prepayment penalties are calculated separately on each portion. Breaking the term early can trigger three months' interest on the variable side and an interest rate differential calculation on the fixed side, so the cost can exceed that of a purely variable mortgage. Prepayment privileges may also apply per portion rather than to the whole balance.
For approval, the federal mortgage stress test applies to the full balance at the higher qualifying rate, so splitting the rate does not reduce the income you must show. Review the trade-offs in our guide to fixed vs variable mortgage rates before choosing a proportion.
Frequently asked questions
Is a hybrid mortgage better than a fully fixed or fully variable mortgage?
It is a middle ground rather than a better option. The fixed portion limits how much your cost rises if rates climb, while the variable portion lets you benefit if rates fall. A hybrid also introduces two sets of penalty calculations and can be harder to compare between lenders, so the right structure depends on your tolerance for payment changes.
Can I convert the variable part of a hybrid mortgage to a fixed rate?
Many Canadian lenders allow you to move the variable portion onto the fixed rate during the term, sometimes more than once, under the terms set out in your mortgage commitment. Some restrict the option or charge a fee. Read the conversion clause before signing, because it is not automatic.
How does the mortgage stress test treat a hybrid mortgage?
The full balance is qualified at the higher of your contract rate plus a buffer or a published benchmark rate, as set out under OSFI Guideline B-20 for federally regulated lenders. Having part of the balance in a fixed rate does not lower the qualifying rate you must meet, so confirm the current rule with your lender.
Sources
Related terms
- Fixed-Rate Mortgage — A fixed-rate mortgage keeps the same interest rate and the same scheduled payment for the entire mortgage term, so each payment is known in advance.
- Variable-Rate Mortgage — A mortgage whose interest rate rises and falls with the lender's prime rate during the term instead of staying fixed.
- Adjustable-Rate Variable Mortgage — An adjustable-rate variable mortgage ties the interest rate to a lender's prime rate, so the periodic payment rises or falls as prime moves.
- Interest Rate Differential (IRD) — A penalty formula some Canadian lenders use when a fixed-rate mortgage is paid off early, based on the interest the lender loses.
- Convertible Mortgage — A convertible mortgage lets you switch from a variable rate to a fixed rate partway through the term, usually without paying a prepayment penalty.