What To Be Wary Of When Shopping For Rates Online

When shopping for mortgage rates online in Canada, it’s essential to be aware of several factors to ensure that you’re getting accurate information and making informed decisions. Just like anything else, sometimes you get what you pay for so here’s what to be wary of and consider when you see those very low rates.

1. Does the interest rate you are seeing apply to your situation? Mortgage rates are not black and white where one rate applies to all types of situations. In fact they are far from it. Mortgage rates are not only based on credit and the strength of the file, but also how much down payment or equity is in the property, how long your amortization period is and whether it is an  insured/insurable or uninsured mortgage. Also is it the term you are looking for or the type of rate you are comfortable with? There is so much to consider when it comes to what rate applies to you so the advertised rate you are seeing (which of course will be their lowest rate offered under any conditions) may not be what you are qualified or looking for.

2. Beware of rate shopping by going from bank to bank.  It is not possible for any mortgage professional to give a rate that you can qualify for without doing a credit check, since it plays a critical part in the rate you get as mentioned above. If you are going bank to bank to find out the rate that applies to you and they are doing a credit check each time, this will hurt your credit and bring your score down at a time when it’s very important to keep it in good standing. With a Mortgage Agent we do one credit check to shop across all lenders including big banks.

3. Watch out for the fine print.  When advertising it is common for any company to advertise their lowest price to try and “get you in the door”, but did you know that lowest price might come at a cost for your mortgage? Mortgages can be the same as anything else and you can get what you pay for. Certain mortgage products might be at a lower rate, but you may not be able to refinance during your term if needed, port your mortgage if you want to move and even in some circumstances to sell your house to get out of the mortgage. Other products do not allow you to pre-pay your mortgage faster if you wanted to so it’s wise to know the flexibilities and inflexibilities about your mortgage.  If you have your eyes on a really low rate that nobody else comes near, beware there may be more to it in the fine print that could cost you more in the long run. The lack of flexibility of these mortgages may certainly come at a cost that is not worth the low rate you see.

4. Beware of introductory rates.  They are out there and they can be costly. Introductory rates may look nice for the first few months, but should you need to renew your mortgage after the introductory period it may be at a higher rate than most lenders for the rest of your term or the lender will charge a fee if you go elsewhere. If you decide to pay out the mortgage instead they may then charge you a fee.

Keep in mind when shopping for mortgage rates, banks like any other business are in the business to make money.  If you feel you’re getting a really good deal on a rate, just be wary.  Speaking with a trusted Mortgage Agent can be helpful as they should be aware of the different mortgage products and rates available, which rates are truly a “good rate” and which products may have fine print you may not be happy with. At the very least they should be able to bring to your attention the fine print and you can make your own informed decision.

Jennine Hadfield

Embarking on the journey of homeownership in Canada comes with a myriad of decisions to make, and one of the most significant is choosing the right mortgage. With various options available, understanding the landscape of Canadian mortgages is essential for making informed decisions about your home financing. In this guide, we’ll explore the different mortgage options in Canada, empowering you to navigate the process with confidence and clarity.

Fixed-Rate Mortgages: Fixed-rate mortgages are a popular choice among Canadian homebuyers for their stability and predictability. With a fixed-rate mortgage, your interest rate remains unchanged for the duration of the term, typically ranging from 1 to 10 years. This means your monthly payments remain consistent, providing peace of mind and making budgeting easier. Fixed-rate mortgages are ideal for those who prefer certainty in their mortgage payments, regardless of fluctuations in the market.

Variable-Rate Mortgages: Variable-rate mortgages, also known as adjustable-rate mortgages (ARMs), feature an interest rate that fluctuates with changes in the prime lending rate set by the Bank of Canada. While variable-rate mortgages often start with lower initial interest rates compared to fixed-rate mortgages, they come with the risk of rate increases and potential payment adjustments over time. Variable-rate mortgages typically offer more flexibility, allowing borrowers to benefit from falling interest rates but also exposing them to the risk of rising rates.

Open Mortgages: Open mortgages offer flexibility and freedom, allowing borrowers to make additional payments or pay off the entire mortgage balance without penalty. While open mortgages typically have higher interest rates than closed mortgages, they provide the flexibility to make lump-sum payments or pay off the mortgage in full at any time without incurring prepayment penalties. Open mortgages are suitable for borrowers who anticipate receiving a windfall or who prefer the flexibility to pay off their mortgage early without restrictions.

Closed Mortgages: Closed mortgages, on the other hand, have fixed terms and payment schedules, with limited flexibility for prepayment or early repayment without penalty. While closed mortgages offer lower interest rates compared to open mortgages, they typically come with prepayment penalties if you pay off the mortgage before the end of the term. Closed mortgages are suitable for borrowers who prefer the stability of fixed payments and do not anticipate making significant prepayments during the term.

High-Ratio Mortgages: High-ratio mortgages are mortgages where the down payment is less than 20% of the purchase price, requiring mortgage loan insurance through the Canada Mortgage and Housing Corporation (CMHC) or a private insurer. High-ratio mortgages allow borrowers to purchase a home with a smaller down payment, making homeownership more accessible to first-time buyers and those with limited savings. Mortgage loan insurance protects the lender in case the borrower defaults on the loan, enabling lenders to offer high-ratio mortgages with lower down payment requirements. Mortgage loan insurance premiums are added to your mortgage total at the beginning of your mortgage, and is paid out throughout the amortization of the mortgage.

Conventional Mortgages: Conventional mortgages are mortgages where the down payment is at least 20% of the purchase price, eliminating the need for mortgage loan insurance. Conventional mortgages offer more favourable terms and however rates can be a little higher than an insured mortgage. In the long run it usually still works out cheaper to pay the slightly higher interest rate and avoid the mortgage insurance premium that a high ratio mortgage entails, however working with your Mortgage Agent through your specific scenario and numbers will confirm this.  Borrowers with a down payment of 20% or more can avoid the additional cost of mortgage insurance and benefit from greater equity in their home from the outset.

Fixed vs. Variable: Which is Right for You? When choosing between a fixed-rate and variable-rate mortgage, consider your risk tolerance, financial goals, and outlook on interest rate movements. Fixed-rate mortgages offer stability and predictability, making them ideal for borrowers who prioritize budget certainty and peace of mind. Variable-rate mortgages, on the other hand, offer potential savings over the long term if interest rates are low or decline. Assess your financial situation and consult with a mortgage professional to determine which option aligns with your needs and preferences.

Navigating the Canadian mortgage market can feel overwhelming, but armed with knowledge, guidance and the right Mortgage Agent, you can make informed decisions about your home financing. Whether you opt for a fixed-rate mortgage for stability or a variable-rate mortgage for potential savings, understanding the nuances of each option is key to achieving your homeownership goals. Consult with your trusted Mortgage Advisor who can provide personalized guidance and help you navigate the complexities of the mortgage process. With the right mortgage in place, you’ll be one step closer to turning your homeownership dreams into reality.

One of the most popular questions I get is “what are your mortgage rates Jennine?” Unfortunately this question is not a black and white answer and there are many variables to consider when it comes to what rate will apply to your situation. The bottom line on what will determine what rate applies to you is how risky your situation is, and it may not be as easy as you think. Lenders base their decision on many different factors.  Let’s look at some of these factors now.

First your credit score. Your credit is your financial story of how much debt you currently have, what debt limits you have access to, the history of your payments, how long you have had credit, how often you get your credit check, how much you use your credit, if you have had a consumer proposal or bankruptcy and of course your final credit score that is determined from all of the above. The rate you can qualify for will be based on your credit score and all of the above. Low rate lenders want to see a score of 600 at the very lowest and ideally you want your score to be at least 680 to allow you to qualify for the most at the lowest rate. It also depends on all things mentioned below on whether they will consider the application or not. Visit All About Credit blog post for more info on keeping up with your credit.***

Secondly lenders look at how strong your application is as a borrower.  If you have pension income or you are a guaranteed hourly or salary employee that is not on probation and has a great credit score and history, your application will usually be considered as a strong application. If you are not guaranteed hours and have less than 2 years employment with your employer, or you are self employed, are on probation with your employer or have a lower credit score, your application may be considered more risky. There are many income scenarios that could apply but no matter the case, if your debt verses income ratios are high (otherwise known as debt service ratios), then you you will be considered riskier no matter what. Filling out a mortgage application will help your Mortgage Agent determine where your application falls.

Thirdly what term and amortization you want or will qualify for comes into play.  There are different rates for different mortgage terms which is the short term length of time you are signing for your mortgage rate and conditions. Mortgage terms typically range from 6 months to 10 years and each term has a different rate. As well, your rate is based on your amortization which is the total amount of years it could take you to pay off your full mortgage. For an amortization of 25 years or less your rate should typically be lower than a higher amortization such as 30 years. With this said, you may qualify for more mortgage with a longer amortization which may be what is required to make debt service ratios work and qualify for the mortgage. The only way to know for sure is to complete a mortgage application so your mortgage professional can see where your numbers fall and what options you may have.

4. How much down payment do you have?  As I mentioned in the beginning, mortgage rates are based all around risk, and the amount of down payment you have and whether your mortgage is insured/insurable or not plays a big part in the risk. Most home buyers aim to put 20% down on a property if they can to avoid paying mortgage insurance which usually makes most financial sense. However having an insured mortgage gives security for the lender and from their perspective should you decide to forego paying your mortgage, this insurance helps to secure that they would get paid this loan money back.  Therefore rates for an insured mortgage are the lower because you are less risky with the insurance coverage which is paid for by the borrower. Once there is more than 20% down, with most mortgage products insurance is not required but depending on how much down payment you have, this will determine how risky your situation is.  Basically from most lenders perspective, the more you put down, the less likely you will walk away from your home and the payments, therefore the less risky of a borrower you are.  Those that that 20%-25% down may have a higher rate than those with 25%-30% down.  And those that have 25%-30% down may have a higher rate than those with 30%-35% down.  If you have more than 35% down, most lenders will offer you the same rate as the low insured rates you get with less than 20% down since you aren’t likely to walk away from this large amount of down payment money.

5. What are you looking to do with your mortgage? Are you looking to purchase a new home, renew an existing mortgage and change lenders to a lower rate lender, or refinance to take out equity? What you are looking to do with your mortgage can also determine which rate will apply to you.

If your renewal is coming up and you are looking to switch your mortgage to a lender with lower rates and your mortgage currently has mortgage insurance,  you may still qualify for the lowest insurance rates since your insurance can potentially move with your mortgage to the new lender. If you don’t have insurance on your mortgage but the terms and conditions of your mortgage meet insurer guidelines, you would potentially qualify for rates in the other scenarios in #4 based on how much equity is on your home.

If you have more than 20% down and are looking for a longer amortization than 25 years to lower your payments, your rate will usually be slightly higher as this is considered an uninsured mortgage. With it being uninsured you become more risky again and a slightly higher rate will apply to your situation. Don’t let this scare you though if this ends up being the case.  Sometimes stretching your payments a little longer if you can, can allow you to qualify for more mortgage, and it might be just what you need to qualify for that home you have your sights on. In the big picture a slightly higher interest rate for your first term can be well worth it to live in your dream home.

If you are looking to refinance your mortgage and take out equity from your existing home to consolidate higher interest debts or loans or for any reason, this is also considered an uninsured mortgage.  Again, with it being uninsured you become more risky again and a slightly higher rate than lowest rates will likely apply to your situation.  Don’t let this scare you though …..these rates likely won’t be anywhere near the rate your high interest debts or loans are, and we may be able to relieve your monthly payments by hundreds of dollars by refinancing, so it can definitely be worth that slightly higher than lowest rates. We would look at your situation to make sure it made financial sense for you before moving forward with a lender.

So now that we’ve covered a few things that are considered into what rate may apply to you, we can go back to our original question “What are your mortgage rates Jennine?” As you can see, it’s an impossible question for me to answer for you until I do a little more digging on your situation and understand exactly why you are looking for a mortgage. If all of this information confises you, you are not alone and that’s what I am here for! It’s my job to know all of this information so I can make sure you are getting the lowest rate possible for your situation.  I’m here to help you through this  to make process easier for you every step of the way. 🙂

If you wish to know more about what rates would apply to you at this time, feel free to reach out from my website below and we can look into your specific situation through a mortgage application and credit check. With this information I should definitely be able to provide you with more feedback.

Jennine Hadfield Mortgage Advice

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Now that we’ve dug into some things that are considered when determining rates, let’s dive into some advertising techniques that could steer you the wrong way! Check out the “look out for advertiser rates that may seem to be too good to be true.

Working with a Mortgage Agent in Canada can offer several advantages that are specific to the Canadian mortgage market. When it comes to securing a mortgage for your dream home or refinancing your existing property, more and more individuals are recognizing these advantages of partnering with Mortgage Agents for a more personalized and efficient mortgage experience.

In this post, we’ll explore the key benefits to working with a Mortgage Agent.

Access to a Wide Range of Lenders

Mortgage Agents in Canada often have relationships with various lenders, including banks, credit unions, and non-traditional lenders including alternate lenders and private lenders. This extensive network enables Mortgage Agents to find the best mortgage rates and terms that suit the unique needs and financial situations of their clients, all with just one mortgage application and credit check. This flexibility is particularly beneficial for individuals with non-traditional income sources or bruised credit histories, but can definitely be beneficial for any home buyer or owner.

Expertise in Canadian Mortgage Regulations

Mortgage Agents are knowledgeable about the specific regulations and guidelines governing the Canadian mortgage industry. They are required in Canada to undergo regular education and training to stay updated on changes in the mortgage industry. This ensures that they provide clients with accurate and current information. Many do not realize this is not a requirement for Mortgage Professionals at the big banks. 

Assistance for First-Time Homebuyers

Mortgage Agents can be particularly valuable for first-time homebuyers in Canada since they specialize mainly in mortgages. They can guide you through the process, explain the various government programs and incentives available, and help you secure financing tailored to your situation.

Negotiation Skills for Interest Rates

Mortgage rates can vary between lenders, and negotiating a favourable interest rate is crucial. Mortgage Agents are skilled negotiators who advocate on behalf of their clients to secure the best possible mortgage terms. Their expertise allows them to navigate interest rates, fees, and other terms to ensure clients receive a mortgage package that aligns with their financial goals. This negotiation process can result in substantial long-term savings for homeowners.

Accessibility and Flexibility

Mortgage Agents provide a personalized and client-centric approach to mortgage financing. They take the time to understand the specific goals and financial circumstances of their clients, offering tailored advice and solutions. They can often offer flexible hours, including evenings and weekends, making it convenient for clients with busy schedules to discuss their mortgage needs. As well, most times everything can be secured with your mortgage remotely and conveniently.

Negotiation Skills

Mortgage Agents are skilled negotiators who advocate on behalf of their clients to secure the best possible mortgage terms. Their expertise allows them to navigate interest rates, fees, and other terms to ensure clients receive a mortgage package that aligns with their financial goals. This negotiation process can result in substantial long-term savings for homeowners.

Independent and Objective Advice

Since Mortgage Agents act as independent professionals, they do not work for any bank in particular and they are not driven by sales targets or specific product offerings. This allows them to provide unbiased advice focused on the best interests of their clients. This objectivity ensures that clients receive recommendations that align with their financial goals rather than being influenced by the agendas of a specific financial institution.

The End Result

Choosing a Mortgage Agent offers a myriad of advantages, from specialized expertise and access to diverse lenders to personalized service and time efficiency. As the real estate and financial landscapes continue to evolve, the role of Mortgage Agents becomes increasingly crucial in helping individuals navigate the complexities of mortgage financing. By opting for the personalized and client-centric services of a Mortgage Agent, individuals can embark on their homeownership journey with confidence and peace of mind.