When speaking with clients, many of them tend to wonder or ask, "What's the best mortgage rate?"
And most of the time I will answer with, "It depends."
Many factors must be considered before a proper mortgage rate can be quoted. Here's what I will need to know:
1) Income
Do you have enough income to qualify? A-lenders such as banks and mortgage companies offer the best rates, but that also means that they're the most conservative. If you know that you don't have sufficient income, you may need to consider B-lenders (usually 2% higher than banks) or even private lenders (starts at around 6%).
2) Down payment
How much down payment do you actually have available?
Less than 20%? You will be offered the lowest rate because your mortgage will be backed up by the Canadian government (CMHC - Canada Mortgage and Housing Corporation). However, you'll need to pay an insurance premium which will range between 2% and 4%.
Or, do you have at least 20%? The rates will be slightly higher, but you will be better off because you won't have to pay any extra government fees.
3) The use of property
Are you buying the property to live in or will it be a rental? Lenders tend to find rentals slightly riskier so there is usually a rate premium on top of the normal rates.
4) The property value
Properties under $1,000,000 may have more competition, resulting in lower mortgage rates.
5) Qualify for 25 year amortization
If you qualify, your monthly payments will be higher but the rates are lower if you choose a 25 year amortization instead of a 30 year amortization.
6) Type of property
Are you purchasing a condo? House? Land? Commercial property? Every lender has a different appetite on the type of property. The type of property is important as it may affect the number of lenders that will want to secure it.
The above are all factors that I take into consideration when qualifying a mortgage, and eventually placing them with the best lender with the best rate. That's why the answer DEPENDS unless we have more information. Otherwise, there is a good chance that the quote or rate will be incorrect.
And that's it! We just went through all the factors that a bank or mortgage broker will need to know about before quoting a proper mortgage rate. Feel free to comment down below or send us a message if you would like to chat or have more questions regarding mortgage rates!