Determining Your Mortgage Rate
There are two main factors that affect what type of rate most mortgage shoppers in Mississauga will receive. (1) Whether it is a property purchase, mortgage renewal or mortgage refinance (2) How much equity or down payment is available in your application.
If you are applying for a home purchase or mortgage renewal, this is where the lowest rates in Mississauga are available.
Within this mortgage type, down payment or equity available has a big effect on what rate you will receive. Here is the general breakdown and explanation of how it works:
Less than 20% down payment mortgages:
Also known as high ratio or ‘insured mortgages’, these mortgages have a CMHC default insurance fee built into them, so that in the unlikely chance that the borrower defaults, the mortgage default insurance will kick in and pay out Bank. So in this case, the bank has no risk since the mortgage default insurer will pay out the mortgage.
Pretty sweet deal for the bank huh?
It is, and given the no to little risk involved with this mortgage type, mortgage lenders and banks are able to provide some of the best Mississauga mortgage rates for this mortgage type.
To be clear – ALL non-private lending mortgages in Canada with less than 20% down payment MUST be mortgage default insured. So for about 23% of the mortgage market in 2018, they will slip quite comfortably into one of these rates.
Please note that the mortgage default insurance is included in the mortgage balance and does NOT have to be paid upfront or out of pocket.
20% Down Payment Mortgages Mississauga
At 20% down payment, the borrower can safely escape the clutches of mortgage default insurance. This is great news, since your mortgage balance will probably be lowered by thousands of dollars.
However, 20% is the MINIMUM down payment that a borrower is able to make to escape the insurance fees, and it, therefore, leaves the lender open to the maximum amount of risk possible.
Because of this increase risk (the lender no longer gets a free ride if a borrower were to stop making payments) there is a rate premium charged. This rate premium is usually about .20% above the absolute lowest rate in the market.
However .20% times 5 years is still only 1%, and compared to the cost of mortgage default insurance, this is still a better deal. More to come on how Brokers can lower Mississauga mortgage rates to their absolute lowest level – including those 20% down payment applications.
25% – 35% Downpayment Mortgages
As the down payment or equity available increases, this provides safety for a lender. So they are able to lower rates to levels seen in the default insured mortgages. Think of it this way. If you were an investor in a mortgage (if you were loaning money to earn a return) – what mortgage would you rather invest in? A mortgage with a 20% down payment or a mortgage with a 35% down payment?
The answer is pretty obvious.
Because of this preference for investors to fund mortgages in the 30% – 35% equity range, the rates are correspondingly lower.
Renewal Mortgage Rates
When it comes to mortgage renewals, even if there was a 5% down payment 5 years ago, chances are there is probably now 30% to 35% equity available in the home due to increases in the Mississauga real estate market. So the lowest mortgage rate can be obtained in this case.
Often renewal rates can be 1% lower than the renewal rate offered through the existing lender, so for mortgage renewal shoppers please be especially aware of the discounts that are likely available to you.
Mortgage refinances are used to extract money out of the home for debt consolidation, investment, renovations etc.
In recent years, the government has limited funds that are available for mortgage refinances. With less supply of funds, comes a higher price.
The price is not too much higher but can often be as much as .35% – .50% higher than the lowest possible mortgage rates in Mississauga.
How a Mortgage Broker can Ensure you the Best Rate
There are two fundamental ways that a Broker can lower your rate to its absolute best in Mississauga.
The first is that the right lender needs to be available with the best discounts.
For example, some Brokers do not have access to all lenders. If there is a Bank or other mortgage lender that has a rate special on, and the Broker does not have access to this lender, then how can they offer it to the customer?
Along the same way of thinking, if there is not enough business conducted by that Broker to get the best lender mortgage rate specials, then these broker can’t offer the best rates to their customer.
So the best mortgage rate Mississauga discount, from the lowest rate lender is very important.
The second, and more secretive way that a Broker can lower your rate is by taking less lender paid commission for themselves. In other words, if a broker earns less money on your application – they can pass these savings on to you in the form of the best mortgage rate.
So dealing with a broker whose business model it is to ALWAYS offer the lowest mortgage rates in Mississauga will ensure you get the best deal not only for this transaction but for many years to come.