The Best Mortgage Rates in Canada Right Now
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Loading... - Omari Hussein
- 31 Dec 2024
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If you're on the hunt for a budget-friendly mortgage, you're in luck! This guide provides a comprehensive overview of the best mortgage rates currently available in Canada, showcasing top-notch pricing from mainstream lenders and rate aggregators. With a variety of options at your disposal, you can significantly improve your chances of landing an excellent deal.
However, securing the lowest overall borrowing cost involves more than just finding the headline rate. Below, we outline essential strategies for negotiating the best mortgage rates in Canada.
How to Qualify for the Lowest Mortgage Rates
To access the lowest mortgage rates, it's crucial to understand the role of default insurance. Here’s why it matters:
i. Default Insurance Requirement: Most new mortgages with less than a 20% down payment require default insurance by law. This insurance acts as a safety net for lenders, reducing their risk and allowing them to offer lower rates. While it may seem counterintuitive to receive a better rate with a smaller down payment, insured mortgages actually lower costs and risks for lenders compared to uninsured financing.
ii. Quick Tip: If you switch lenders at maturity without increasing your borrowing or amortization, ensure that the new lender maintains your insurance. This could qualify you for lower rates now and in the future.
iii. Lender-Paid Insured Mortgages: Another way to secure lower rates is through lender-paid insured mortgages, also known as “insurable” mortgages. These apply to conventional mortgages with at least 20% equity, an amortization period of 25 years or less, and owner-occupied homes purchased for less than $1 million. Insurable pricing can often be 10-25 basis points (bps) lower than uninsured rates.
Quick Tip: A 10 bps rate savings can keep over $470 in your pocket over five years for every $100,000 borrowed with a 25-year amortization.
Key Qualifications for Prime Mortgage Rates
To qualify for the best prime mortgage rates, you typically need to meet the following criteria:
i. Credit Score: A credit score of 720 or higher is generally required. Some lenders may allow lower scores, but this is a good benchmark.
ii. Clean Credit Report: Ensure there are no derogatory marks on your credit report in the last few years, such as missed payments.
iii. Debt-to-Income Ratios:
- Monthly housing costs should be less than 39% of your gross monthly income. This includes mortgage payments, heating costs, property taxes, and half of any condo fees.
- Total monthly debt load must not exceed 44% of your gross monthly income, which includes housing costs from all owned properties, loan payments, alimony, child support, and 3% of any credit card or unsecured credit line balances.
iv. Provable Income: You’ll need to provide documentation of your income, such as a job letter and pay stub, or tax documentation from the past two years if self-employed or using bonus, contract, commission, or part-time income.
v. Closing Date: Ensure your closing date falls within the lender’s rate hold period. Some of the lowest rates may require a close within 30 days.
vi. Marketable Home: The property itself should be marketable. Rural or unconventional homes that are harder to sell may not qualify for the lowest rates.
Finding the best mortgage rates in Canada requires a strategic approach and an understanding of the factors that influence borrowing costs. By ensuring you meet the necessary qualifications and considering options like default insurance, you can position yourself to secure a favorable mortgage rate. With the right preparation, you can navigate the mortgage landscape and make informed decisions that align with your financial goals.
