Rob McLister: Today’s lowest national insured and uninsured mortgage rates, updated daily
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Canada’s mortgage market is changing all the time. Bookmark this page to find the top national insured and uninsured mortgage rates, updated daily, based on data from MortgageLogic.news. Postmedia and Imaginative.Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts.
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On the hunt for a budget-friendly mortgage? You’ve just struck gold. This is Canada’s one and only compilation of mortgage rates that aims to showcase top-notch pricing from every mainstream lender and rate aggregator — provided their rates pass muster.
This vast array of options is key because having a buffet of reputable lenders at one’s disposal improves the odds of landing a killer deal.
But if you want the lowest overall borrowing cost, the quest doesn’t end with the headline rate. Below, you’ll find the ultimate playbook for negotiating the lowest overall borrowing costs in Canada.
First off, it’s essential to understand that the lowest mortgage rates require default insurance. Why? Because mortgage insurance is like a safety net for lenders, making loans less risky and, therefore, cheaper to offer.
Most new mortgages with less than a 20 per cent down payment require this insurance by law.
Now, we get that it might seem backwards to put less down and get a better rate. However, insured mortgages actually cut down costs and risks for lenders compared to uninsured financing.
Quick tip: If you switch lenders at maturity and don’t increase your borrowing or amortization, make sure the new lender keeps your insurance in force, as that could qualify you for lower rates today and in the future.
Besides borrower–paid default insurance, lender-paid insured mortgages (a.k.a. “insurable” mortgages) are the next best way to get lower rates.
Insurable rates apply to conventional mortgages sporting at least 20 per cent equity, an amortization of 25 years or less, and an owner-occupied home that was purchased for less than $1 million. Insurable pricing can often be 10-25 basis points (bps) less than uninsured rates. (One basis point is equal to 0.01 per cent or 1/100th of a per cent.)
Quick tip: A 10 bps rate savings keeps over $470 in your pocket over five years, for every $100,000 borrowed with a 25-year amortization.
Insurance aside, to qualify for the best prime mortgage rates, you’ll typically need:
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Quick tip: Federally-regulated lenders must calculate your debt ratios using a stress test rate, which is 200 bps above your actual contract rate, or 5.25 per cent, whichever is higher. This hurdle often makes it harder to qualify for some terms than others. For folks with high debt-to-income ratios, the stress test often dictates what rate and term they’ll get approved for.
Update: Effective Nov. 21, 2024, the government’s stress test no longer applies when borrowers switch lenders, regardless of whether they have an insured or uninsured mortgage. This loophole requires that the mortgage amount and amortization remain the same.
If you’re a non-prime borrower who needs more lender flexibility, prepare to open your wallet wider — much wider. Non-prime borrowers include those who have:
These factors can cost you at least 100-200 bps more than the best rates. Plus, don’t forget the cherry on top: non-prime mortgages typically entail lender and/or broker fees of one per cent of the mortgage amount, or more — sometimes much more depending on how risky your application is.
Lenders also apply surcharges to offset extra risk. Here are some common rate premiums:
Pre-approvals often cost more. That’s because most pre-approvals don’t end up closing, leaving the lender with hedging costs and no revenue.
Quick tip: Only non-prime lenders offer amortizations over 30 years. However, if you get a home equity line of credit (HELOC), the amortization on its low interest-only monthly payments is technically infinite — assuming you don’t make principal payments.
Saving as much as possible on your mortgage rate takes legwork. Here’s an eight-step survival guide for braving the negotiation jungle:
Quick tip: Over the long run, shorter terms and variable rates have historically saved borrowers more than longer-term rates, like a five-year fixed. Long-term fixed rates typically do better when the prime rate is well-below its five-year average. Short and variable rates tend to outperform when the prime rate is above its five-year average and flattening out.
Quick tip: No lender can quote a rate with certainty until you apply. They need to see your credit, income, down payment, monthly obligations and property information to confirm they meet minimum guidelines. Applications do not bind you to the lender, however. In most cases, you can get out of a deal anytime before closing, even if you’ve signed the approval (a.k.a. “mortgage commitment”). That said, contact a real estate lawyer if you have doubts about the wording in your mortgage agreement.
Don’t bother trying to negotiate specific wording in the lender’s mortgage contract. Big lenders have their contracts locked down. Unless it’s a mom-and-pop private lender, you have virtually no chance of convincing a lender to change its ironclad legalese. Your best bet is to read it, understand it and if you don’t like it, walk away.
There are so many ways a lower rate can cost you more in the long run. If a lender or broker is trying to sell you on a rate, here are 14 questions to ask them:
“You get what you pay for” rings true for mortgages as well. Mortgages that are more flexible cost the lender more, so they usually charge heftier rates. However, shelling out a bit extra initially could save you loads down the line — if you need flexibility later. Here are some of the most common features to scout for:
Portability: If there’s a chance you might move before the mortgage matures, make sure you can take your mortgage to that new property to dodge early payoff charges. Beware: some lenders only allow same-day ports. That means your old and new mortgages must close on the same day, a logistical headache. Others give you up to 180 days. The more the better, but 60 days is usually enough. Note that most credit unions don’t allow portability across provincial boundaries.
Mid-term refinances: If you might need to borrow more before maturity, make sure you can do so without penalty. If you have what’s called a collateral charge, some lenders let you add new borrowing without affecting your existing mortgage rate.
Quick tip: If you’re increasing your borrowing before the mortgage matures, make sure the lender doesn’t bury penalties in its refinance offer by increasing the rate.
Early-renewals: Some lenders let you renew your mortgage before maturity. That can sometimes help you lock in a good rate before a Bank of Canada rate hike cycle begins.
Fixed-payment variables: Most variable rates have locked-in payments, so when prime rates climb, your monthly bill doesn’t (see exception below). Other lenders sell adjustable-rate mortgages, whereby the payment rises and falls with the prime rate. Fixed-payment variables provide payment protection but only to an extent. If Canada’s benchmark prime rate soars 275 bps or more — and your payment doesn’t cover the interest due — most, but not all, lenders will raise your “fixed” payment to cover the interest.
HELOCs: If you like the idea of tapping into home equity whenever it suits, seek out a readvanceable mortgage. You’ll need at least 20 per cent equity, a reasonable debt-to-income ratio and strong credit to get one. Readvanceable mortgages let you borrow on demand with low interest-only payments — typically at prime rate to prime plus 0.50 per cent. Some lenders even have a feature where your borrowing limit automatically rises as you make principal payments on the mortgage portion.
Prepayment options: Folks who expect to have spare cash flow, and who want to prepay their mortgage to save interest, should consider prepayment flexibility. Lenders commonly allow a 10 to 30 per cent annual prepayment option. Some low-frills mortgages allow no prepayments or just five per cent annually. Don’t bother paying a higher rate for more than 10 per cent prepayment privileges unless you’re fairly sure you’ll use it.
Quick tip: If you’re breaking the mortgage early, some lenders prohibit prepayments within 30 days of the date of discharge.
Hybrid terms: Some lenders let you diversify rate risk by mixing parts of your mortgage into different terms — like pairing a long-term fixed with a short-term fixed or variable. That can be a smart move for rate diversification. Just be sure to keep the term lengths identical. If you don’t, the lender might have you over a barrel when the shorter term renews. In that case, if you didn’t like their renewal offer, you’d be stuck with penalties if you bail.
Published rates: Other things being equal, look for a lender that transparently advertises its renewal, early refinance and variable-to-fixed conversion rates. Check to ensure they’re decent, especially if you plan to potentially borrow more after closing.
Assumability: The feature is over-rated because few people use it, but assumability lets a future buyer of your home take over your mortgage. That’s occasionally appealing to buyers if you have an ultra-low rate with enough time left on your term. Just a heads-up: in some cases, if the new owner misses payments, the lender might come knocking on your door.
Cash rebates: Many banks now lure new customers with cash rebates, sometimes topping $4,000 for sizable mortgages. This can cut your effective borrowing costs materially. There’s a catch, however. Cashback offers often require that you open a bank account and use it for your mortgage payments. And, if you break the mortgage early, expect those rebates to be clawed back proportionally.
Bridge financing: Bridge loans provide cash to cover the down payment on a new property while you wait for your old one to sell. If your lender doesn’t offer cost-effective bridge financing, that can be a problem if you move before your mortgage matures.
Skip-a-payment: Payment holidays, as they’re called, let you skip one or more payments each year. That can give you financial breathing room when times get tight.
Service: How easy is it to get support after closing? Do you offer annual mortgage reviews to see if I can save money by refinancing? Do you offer strategies to use my mortgage as a tool to build net worth quicker? These are all questions worth asking.
When haggling with a mortgage lender or broker, here are seven questions to ask:
By now, you’ve probably realized that Canada’s lowest mortgage rate isn’t the Holy Grail of financing. Minimizing total borrowing costs matters far more, and achieving that entails some legwork.
So, before you sign on that dotted line, make sure you’ve asked more questions than a contestant on Jeopardy. After all, you want to find a mortgage that fits you like a tailored suit. Only after you’ve nailed that part down should finding the lowest rate become paramount.
Read more from Rob McLister
Who’s afraid of the big bad variable rate mortgage?
How to qualify for a mortgage when your current income doesn’t cut it
How to avoid the financial misery that comes with too much mortgage
For mortgage seekers, a good broker is paramount. Here’s how to find one
Why the smart money is buying single-family homes
What 30-year amortizations mean for mortgage consumers
Why obsessing about paying off your mortgage early costs you money
If you’re tapping the parental ATM for a down payment, here’s how to do it right
For young people, the fastest route to home ownership runs through the trades
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.
For the latest mortgage rate changes, check this page daily.
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