I get asked frequently when first talking to a client, “What are your rates?” This question is perhaps similar to a person calling a grocery store and asking, “What are your prices?”
This question may come up often, as with a client’s bank there are only a few mortgage options to choose from. Fortunately, there are dozens of lenders to choose from with a mortgage broker. These options also include major banks. And with many options at each lender, that means hundreds of mortgage options for you.
Within these options however, there are more factors that may go into determining your rate. Some of these factors a home buyer may not be aware of. From these following examples, you may quickly see how having a mortgage broker assist in finding the right option for you is crucial to finding the best interest rates for mortgages in Ottawa.
Not all lenders lend in all provinces, so depending on what province you are purchasing in, this may mean more lenders and rates or fewer lenders and rates to choose from. Typically provinces with more competitive real estate markets will have more lenders and competitive mortgage rates.
How long the rate is held
Lenders typically will hold rates for 45 to 120 days. Generally, the longer you need a rate held, the higher the rate. If your closing date is more than 120 days away, you will need to review rates closer to your future closing date.
Many lenders are starting to add a premium to rates on a refinance. Also, with recent changes to mortgages, some lenders can no longer offer competitive refinance options. This means fewer lenders to choose from overall. Homebuyers will typically have lower rates than those refinancing.
Learn more: Mortgage Refinancing
Some properties are considered higher risk than others. Some lenders may not be able to assist with them or will have higher rates on these properties.
Second homes, vacation properties and income properties
These properties may have a premium added to a rate. Also, depending on the number of units in the rental property or if there is a commercial component, this can affect rates.
Your credit score is a large factor in determining your rate. Those with excellent credit will typically see lower rates than those with bad credit.
Learn more: Bad Credit Mortgages
Insured or uninsured
Those who have an insured mortgage (i.e. through CMHC when putting less than 20% down) may have access to lower rates. Lower rates compared to those with uninsured mortgages. Also, some lenders regardless of your down payment or mortgage structure will offer different rates based on if your mortgage is potentially ‘insurable’ or ‘uninsurable’.
Learn more: High Ratio, Conventional, Insured, Insurable and Uninsurable
Fixed or variable
The type of mortgage you choose, whether a fixed-rate mortgage or a variable rate mortgage, can have a big impact on your rate.
Homes prices of $1,000,000 or more can see higher rates than those under $1,000,000. Also, some lenders cannot assist with homes over $1,000,000, which means less lenders and rates to choose from.
Your loan to value
Lenders are now offering rates based on your loan to value. Those with 20% down may see a higher rate than those with 40% down, as an example.
30+ year amortizations are still available. However with these option their may be a premium on the rate or less lenders and rates to choose from.
Pre-approval or an active purchase
Some lenders with the best mortgage rate offer the rates on active purchases only. Also some lenders are adding a premium to the pre approval rate you are offered.
As you can see there are many factors that go into determining your rate. Working with a mortgage broker will be your best decision best interest rates for mortgages.