Shopping for Mortgage Rates in Ontario: What You Need to Know
20 June, 2017 / by Bryan Jaskolka
If buying a home is the biggest investment you’ll ever make, the mortgage you need to finance it will probably be the largest debt you ever assume.
Mortgage rates have a significant impact on the overall cost of your home. Even a slight difference in the rate you pay can mean huge savings over the life of the loan. If you don’t obtain the best mortgage rate, you stand to pay tens of thousands of dollars in extra financing covers over the span of your mortgage.
When it comes to financing your next home, shopping around for the best mortgage rate makes financial sense. If you’re on the prowl for new property or are looking to refinance existing property, here are five steps you can take to obtain the lowest rate you qualify for.
1. Check your credit score
When it comes to obtaining a mortgage, your credit score matters. Lenders will use it to determine: (a) if you qualify for a loan and (b) how much you’ll be charged for it. In general, borrowers with higher credit scores receive lower mortgage rates and better offers in general.
However, credit score isn’t necessarily a make or break deal when it comes to obtaining a mortgage. It all depends on who you work with (more on that #2).
2. Work with a mortgage broker
Over the past decade, more and more Canadians have sought the advice of mortgage brokers before going straight to their bank for a loan. There’s a very good reason for that. Mortgage brokers can help you find cheaper mortgages and more favourable lending terms. That’s because they work on your behalf to find the best solution for you. They’ll contact the major banks as well as private lenders to secure your mortgage.
A mortgage broker is ideal for borrowers who have less than ideal credit, self-employed people and anyone who simply doesn’t want to go through a traditional bank.
Canadian Mortgages Inc. (CMI) has several mortgage agents across Ontario and Canada who will work on your behalf to obtain the best mortgage service for you.
3. Look at different mortgage types
If you work with a broker, they’ll share with you several mortgage types that may be suitable for you. In general, you’ll need to pick between a fixed-rate mortgage and an adjustable-rate mortgage.
A fixed-rate mortgage is a loan that applies the same interest rate for the entire term of your loan. If you have a steady source of income and want to be locked in at a stable finance rate, a fixed-rate mortgage is beneficial.
An adjustable-rate mortgage is a loan with an interest rate that changes periodically. As interest rates are rarely static, mortgage rates tend to move up or down. An adjustable-rate mortgage is a good option if you or your broker believes that interest rates are going down in the foreseeable future.
Click here to compare mortgage rates.
4. Consider all the costs
A low interest rate is important, but so are the fees tied to purchasing a home. Since lower rates are often accompanied by higher fees, it’s important to carefully consider all options. Loan origination, underwriting fees and closing costs must all be carefully evaluated before choosing a mortgage. You should also ask about prepayment penalties and the cost of ending your mortgage early.
5. Obtain a pre-approval letter
Once you decide on a mortgage lender, be sure to receive a pre-approval letter. This usually involves income verification, credit check and verifying the source of your down payment. Be sure to get this in writing before you zero in on buying a home. In Canada, pre-approval can be obtained up to 120 days before you want to buy a home.
Securing a favourable mortgage rate early can take a lot of the stress out of house hunting. By shopping around and working with a broker, you can more easily obtain the best mortgage you qualify for.
Investopedia (March 21, 2017). “Shopping for Mortgage Rates.”
WhichMortgage.ca. Understanding pre-approval.