How do I find the best mortgage rate?
Find and compare the best mortgage rates from various banks, credit unions, monoline lenders, and mortgage brokers, using the mortgage search tool. The lenders and brokers you see in the search results are some of Canada's largest and most reputable mortgage lenders.
You will find a variety of mortgage rates using the search tool. Most mortgages are provided directly by the lenders themselves. Other mortgages are supplied by intermediary mortgage brokers who have access to volume discounts from the lenders.
When you're comparing mortgages, don't just focus on the interest rate. Consider the type of interest rate and term type you'd want on your mortgage as well. With the mortgage search tool, you can find fixed-rate and variable rate mortgages, along with term types of closed, open, or convertible. Each of these options has its positive and negative attributes, so be sure to know what kind of mortgage you want before you start your search.
You'll also want to know the length of the term you will want on your mortgage. Do you want to lock into a longer-term mortgage agreement or a shorter-term mortgage? Most people opt for a term length of 5 years, which gives them some short-term flexibility and some long-term predictability as well. Mortgage terms of 5 years also come with lower interest rates than most other term lengths.
How do I use the mortgage search tool?
Use this mortgage search tool to find the most competitive mortgage rates in Canada. In the search box area, you'll find the following options that you use to find the best mortgage to suit your needs:
- Purchase price – Enter the purchase price of the property you wish to buy
- Down payment – You can enter in the down payment amount or percentage amount you are willing to put down on your mortgage. If you put down less than 20%, the search tool will include rates for high ratio mortgages
- Amortization – Enter in the amortization length of your mortgage term. If lenders have mortgage rates for specific amortization periods, the search tool will show you those as well
- Payment frequency – By default, the mortgage search tool uses monthly payment frequencies. You can, however, select different payment frequencies to see how your mortgage payments can change
- Term – Select the term length of your mortgage
- Type – Select the type of mortgage you want. Options include fixed-closed, fixed-open, variable-closed, variable-open, and convertible-fixed mortgages
- Province/territory – Some mortgage rates are only available in individual provinces or territories. By default, the search tool will select the current province or territory where you are located, but you can also search for mortgages in a different region.
Can the rate I see differ from the rate the lender offers?
In some cases, the interest rate can be different. Lenders typically have lower discounted rates available that aren't public. The rates you see advertised by lenders are called "posted rates." Often, mortgage lenders can give you a much better interest rate than their publically posted rates.
The interest rate you end up receiving could also differ depending on your credit history. The stronger your credit score and income stability, the more likely you'll receive a better rate from a lender.
Some brokers and lenders may already advertise their lowest rates upfront. In this case, you'll receive their best rate no matter what. In either case, it's always best to try and negotiate with the lender or broker for a better mortgage rate, should they be able to offer it.
What is the mortgage term?
The mortgage term is the period that you'll commit to a specific mortgage contract with a particular mortgage lender. In Canada, most mortgage terms are 5 years in length, but they can be shorter or longer depending on your needs.
On most mortgages, if you end your mortgage term early, you'll face a mortgage penalty charged by your lender. The mortgage penalty amount depends on the interest rate on your current mortgage and on the amount of time left before your mortgage term expires.
Once your mortgage term expires, you're free to renew your mortgage or renegotiate your mortgage entirely. You're also free to switch to a new mortgage lender under an entirely new mortgage agreement.
What is a fixed rate?
A fixed-rate mortgage is a mortgage where its interest rate is locked in for the entire term and never changes. If interest rates change, your mortgage payments will stay the same. Fixed-rate mortgages offer predictability when it comes to your mortgage. You will know exactly how much your mortgage payments will be on each payment date.
What is a variable rate?
A variable-rate mortgage is a mortgage where its interest rate can fluctuate as the Bank of Canada policy interest rate fluctuates. When interest rates move up, you pay more interest on your mortgage loan. When interest rates go down, more of your payment goes towards paying down the principal amount.
Variable-rate mortgages typically have lower interest rates than fixed-rate mortgages. They could be a good option if you believe interest rates will remain low for the duration of your mortgage term. However, you'll also take on the risk that if interest rates rise, so will your interest payments.
What is a closed term?
A closed term mortgage is a mortgage where you can't make extra payments towards your mortgage principal, or increase your mortgage payments, beyond a set amount prescribed by your lender every year. In the mortgage industry, making extra payments on your mortgage is referred to as making a prepayment.
Typically, most mortgage lenders will allow you to make prepayments of anywhere from 10% to 20% of your original mortgage principal every year. They also usually allow you to increase your mortgage payment by up to 20% every year as well.
Prepayment limits, on closed term mortgages, vary from lender to lender. If you exceed your prepayment limits, your mortgage lender will charge you a penalty fee. When comparing mortgage rates, also compare the prepayment limits and associated penalties for exceeding them.
What is an open term?
An open term mortgage allows you to make unlimited extra payments (also called prepayments) towards your mortgage balance whenever you want during the mortgage term. There are no limitations on making prepayments. You're free to pay off your mortgage entirely at any point during the mortgage term.
Open term mortgages are great if you anticipate receiving a large cash influx during your mortgage term, and you want to use it to pay down your mortgage. They're also a great option if you will be selling your home in the next year, and you want to end your mortgage term early.
Typically, open term mortgages have higher interest rates than closed mortgages and shorter-term lengths.
What are high ratio mortgages and insured mortgages?
A high ratio mortgage is a mortgage where you put less than 20% down payment on your home purchase. If you put less than 20% down payment on your mortgage, you are required to have mortgage default insurance. These types of mortgages are called high ratio or insured mortgages. Most lenders will offer slightly lower rates on insured mortgages, but much of the interest savings can be offset by the added mortgage insurance premiums you'll have to pay.
What credit score do you need for a mortgage?
To qualify for a mortgage, you'll need a good credit score. Credit scores fall in the range from 300 to 900. The higher your credit score, the better. Any credit score above 720 is considered good. Anything above 780 is excellent.
The higher your credit score, the better chances of you getting approved for a mortgage. At the very minimum, to get approved for a mortgage, if your down payment is less than 20%, you'll need a credit score of at least 680. If you're putting more than 20% down, a credit score of 600 can be acceptable.
Your credit score can also influence the interest rate that is ultimately offered by your mortgage lender. The higher your credit score, the lower your interest rate will be. The lower your credit score, the more interest you'll pay on your mortgage. Having a good credit score is very important when it comes to getting a mortgage.
You can find out what your credit score is for free online. Sign up for free at Borrowell to get your credit score report in minutes.
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