Knowing if you are getting the best mortgage rate is hard. The challenge is that there are so many banks, lenders and websites to compare. Here is some information to help you get the best interest rates for mortgages in Ottawa.
In this article:
1. How to find the best interest rates for mortgages?
2. Who offers the best mortgage rates?
3. How are interest rates determined?
4. Five mistakes to avoid when shopping for the best rates for mortgages
Learn more: Compare today’s best interest rates
Three ways to find the best interest rates for mortgages in Ottawa:
1) Use a mortgage broker
A mortgage broker is there to help negotiate a rate on your behalf. Also, it’s typically the lender that pays the broker for this service. With that, the service is at no cost to you. Think of it as a personal shopper for your mortgage, and for free.
The top mortgage brokers in Ottawa have access to banks as well as credit unions, trust companies, monoline lenders and more. This means more lenders which in turn means more options and more savings.
The best Ottawa mortgage brokers work for you and not the bank. You get unbiased guidance on finding the best interest rates for mortgages in Ottawa, options and lender for you.
Learn more: Using a mortgage broker
2) Mortgage rate websites
These sites are a great way to get a general idea of the current best mortgage interest rates in Ottawa.
One problem is that some of the rates on the sites may be out of date or not applicable to your situation. It’s important to cross reference the rate with the company they are advertising. Also, to explore further into the fine print to see if the rate is applicable to you. For example, the rate advertised on the site may be for those putting less then 20% down on a purchase. However you are looking to refinance your current mortgage.
By bringing the rates you see on the rate websites to your broker, they will be able to quickly find within these rates, the best one that applies to your situation.
A challenge with the rate websites, is usually when working with them for your mortgage, there is no personalized service. With this, you may not get one person that will help you set up the mortgage and assist with after closing assistance as well.
Sometimes you get what you pay for with these sites and the trade off for a lower rate is reduced service or options.
Also as the site is advertising the cheapest rates, this can also sometimes mean reduced options on your mortgage. Just like a cheaper hotel or cheaper car may come with less options.
Be sure that the mortgage rate and most importantly the options with the mortgage both suit your needs.
3) Negotiating with your bank
Typically when you walk into your bank and talk about mortgage rates, the rates you are offered are not usually the the best interest rates for mortgages in Ottawa. Some negotiation with the bank can usually result in some discounts however you may find that the rates are still not competitive with the rates you are seeing with your broker or online.
The bank branch, like a retail store comes with lots of overhead and sometimes that creates challenges in offering a lower rate. Just like some stores have trouble competing with online prices.
Usually taking the rates you find online to your bank can assist you with the negotiations.
If you are not into the idea that you have to negotiate with your bank just to get a good rate, you may find a broker or online route more suitable, upfront and faster.
Who offers the best mortgage rates?
There was an interesting article in The Star about who gives and who gets the best mortgage rates either from their bank as loyal long-term customers or first time buyers and people who switch banks. Despite what many would think, the answer is first time buyers and people who switch banks.
There are a few reasons for this such as loyal clients are less likely to shop around and new customers give the bank a chance to grow their banking relationship and the bank may give extra incentives to win them over.
Without a competitive offer a bank will usually offer a client average rates and only try to beat that if they are brought a competitive offer. A Bank of Canada study found that loyal bank customers do not get as low of rates as people who switch banks and first time buyers.
As this is the biggest and one of the most important purchases of your life every percentage point counts in saving you money.
The best way to assure you are getting the best mortgage rates in Ottawa is to contact an Ottawa mortgage broker. The article goes on to say exactly that. “The study also found that mortgage brokers find the best rates”.
I am able to look at dozens of bank’s and lender’s best rates and share that with you up front. This saves you the time of visiting bank after bank to see if one can go lower than the next.
Contact me today to learn more about who gives and who gets the best mortgage rates in Ottawa.
Learn more: Mortgage renewal
How are interest rates determined?
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. Theses 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 less lenders and rates to choose from. Typically provinces with more competitive real estate markets, will have more lenders and competitive mortgage rates.
2) 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 less lenders to choose from overall. Home buyers will typically have lower rates than those refinancing.
Learn more: Mortgage refinancing
4) Property type
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.
5) 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.
6) Credit score
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
7) 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’.
8) 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.
Learn more: Find today’s best fixed and variable rates
9) Property price
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.
10) 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.
11) Your amortization
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.
12) 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.
Five mistakes to avoid when shopping for the best interest rates for mortgages:
Shopping for a mortgage can help assure get the best options. Also that you get the best interest rates for mortgages.
1) Thinking banks are the best place to go for a mortgage
An Ottawa mortgage broker can usually beat a bank’s mortgage rate. The mortgage broker may access to more discounts on the bank’s mortgage. There are a variety of reasons for this. One reason is, the broker does not have any of the overhead that the bank branch has. Overhead such as operating the branch and the staff salaries.
Think of this as shopping online for a product, versus going to a store. The online price, such as with Amazon, will be lower for the exact same product.
A bank will only be able to offer you one lender option, their own. A mortgage broker in Ottawa has access to dozens of lenders to cater the mortgage to your exact needs. Also, to find you the best mortgage rate in Ottawa.
2) Not knowing your credit score
Your credit score is a major factor in the mortgage review. Lenders will look to your score right away and depending on your score, this will affect your results, mortgage amount, interest rate and more.
Some banks are not able to provide you with a detailed breakdown of your credit report. So if declined due to your credit, you may be left in the dark as to what the specific credit reason was.
An Ottawa mortgage broker can review your entire credit bureau with you and offer you tips to build your credit score and to find any bumps that may be in your credit history. That way the bumps can be addressed right away.
Learn more: build your credit score
3) Shopping too many lenders
Each time an application is done and your credit is checked, this costs you valuable credit points. A mortgage broker in Ottawa can pull your credit and use this one pull at all the lenders to save you points. As opposed to having each bank check it.
4) Not having your income taxes up to date
If you are non-salaried income or salary plus other, such as self-employed, base plus bonus, commission and so on, lenders will typically use a two year average of your taxable income from your Notice of Assessment or T1 General.
With that, it’s important to have your income taxes up to date. A lender will also want to see that you do not have any income tax in arrears.
5) Not staying up to date with the changes in mortgage lending guidelines
When mortgage guidelines change, typically your mortgage pre approval is no longer valid. This could be seen for example when the stress test rule was introduced.
A mortgage broker can stay on top of these changes for you. This will help assure your pre approval is always in line with current guidelines.