Conversion Rates

A “conversion rate” is the interest rate your lender offers you when you convert from one mortgage term to another.

Conversion rates apply when you convert from a:

  • variable rate to a fixed rate
  • convertible term to a fixed or variable term
  • line of credit to a fixed or variable term

Conversion rates are rarely as good as the rates lenders offer on “new business.” Five-year fixed conversion rates, for example, are often 20 basis points more than the five-year rate a new customer can get from that same lender.

Usually, conversion rates are one of the following:

  • a set amount below posted rates
  • a negotiated rate at the time of conversion
  • a pre-defined discounted rate
  • the lender’s “broker rate.”

Broker rates are typically the lowest of the above options but it depends on the lender.

Tip:  If you’re converting from a variable to a fixed rate, the term of the new fixed mortgage must often be at least 3-5 years (depending on lender).