How Do We Quote the Lowest Mortgage Rates in Ontario?
Because of our high lender volumes and effective business model, we are able to discount rates beyond what other mortgage brokers are willing or able to. Our best mortgage rates do not come from expensive fine print limitations or high penalties.
But this is just the tip of the iceberg.
To learn crucial information about mortgage rate differences, secrets and strategies, scroll down to read our ‘Mortgage Rate Deal Hunters’ guide.
|1 Year Fixed||3.64%|
|2 Year Fixed||3.09%|
|3 Year Fixed||2.59%|
|4 Year Fixed||3.19%|
|5 Year Fixed||2.54%|
|5 Year Variable||2.05%|
|10 Year Fixed||4.22%|
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The Deal Hunters Guide to Mortgage Rate Differences, Secrets and Strategies
Over the past few years, with more and more government rules and regulations creeping onto the mortgage scene, the Ontario mortgage rate market has become increasingly complicated and difficult to understand. A simple online ‘rate comparison’ no longer fully cuts it like it once did.
Added to this, there are literally thousands of banks, mortgage brokers, and mortgage websites out there to decide from, most of which are focused on SALES, not mortgage education or the best interest of the customer.
Given the added complexity and the overwhelming amount of information available, it can be hard to know if you’re really getting the best deal and making the best decisions.
But this is 2020. Mortgages aren’t rocket science and it should not be difficult to uncover the truth about how to get the absolute best mortgage rates Ontario, and the best mortgage product for your situation. So, with a focus on mortgage truth and transparency, this guide was written to empower you with the most important mortgage information and ideas that you need to know to be confident that you are getting the lowest mortgage rates and the best possible outcome for your unique situation.
How Mortgage Rates Work
No matter what trusted mortgage professional you ask, or what research is done, the truth about mortgage rates across Ontario will come down to the simple fact that different mortgage applicants will receive different rates. There is no ‘one size fits all’ rate, and often the very lowest rates seen on the web are available for one type of application.
So when looking for your best mortgage rate, the first thing to understand is what type of mortgage category you’ll fit into.
There are 3 primary factors that will affect what category your rate will fit into:
1.Mortgage Purpose. Whether it’s for buying a home, buying an investment property, renewing a mortgage or refinancing a home. These are all different mortgage financing purposes, with different rate pricing associated.
Home purchase mortgages and mortgage renewals will often receive lower rates than more specialized rental property or refinancing of a mortgage.
2. Down Payment (for a purchase) or Equity Available (renewal or refinance). The mortgage lenders always refer to this as the ‘loan to value’ that you are seeking. In other words – What % of the value of the home will be mortgaged? Vs. What % of the home value is equity (or down payment)? The amount of down payment/equity available can affect the mortgage rate, sometimes in surprising ways.
With a down payment of less than 20%, the applicant would be applying for what’s called an ‘insured mortgage’. Mortgage default insurance is always required for a mortgage with less than 20% down payment and is provided by the Government-owned, Canadian Housing and Mortgage Company (CMHC).
This borrower paid CMHC insurance fee is built into the total mortgage amount and is not paid up front. But the interesting thing is that because the mortgage is insured against default (or against loss due to missed payments), lenders carry very little risk and can provide their lowest mortgage rates.
With down payment or equity available at 20%, this is often where the less rate discounting exist. Because the mortgage is not insured (thus no corresponding CMHC insurance fee included into the mortgage) it represents the most risk for a lender because 20% is the minimum down payment necessary to avoid the CMHC insurance fee. A 20% down payment mortgage will often carry a rate of 0.10% – 0.20% higher than the lowest rates you’ll find advertised around the net.
In the end, however, it’s about saving the most on your mortgage and even with the slightly higher rate at 20% down, the home buyer can still save more than with a lower rate CMHC insured mortgage because they do not have the insurance fee added into the mortgage. In other words, the cost of financing can easily be lower on a 20% down mortgage than a lower rate CMHC insured mortgage.
For those with less than 20% for down payment, or who are renewing a previously CMHC insured mortgage – it definitely helps to have the lower rate to mitigate the CMHC fee.
With a down payment or equity available of 25 – 30% the rates can also come down to the lower levels of CMHC insured mortgages. So having a higher down payment or more equity can give the borrower the best of both worlds – NO CMHC fee, and the lowest rates available.
3. Credit Score. Put simply, with a credit score of 680 or higher the lowest rates can be enjoyed (depending on the other factors as well). Many lenders will not give their absolute best deals to customers with credit scores lower than 680. A good credit score with no, or very few missed payments and at least 2 years credit history, will be in the 700 range.
These three ‘pillars of mortgage lending’ have a big effect on the starting point of your rate. Again the goal is to get the best possible rate in the mortgage market, for your unique situation and without sacrificing good quality fine print.
From here, there are some critically important things that a mortgage broker can do to lower your mortgage rate, no matter what category you fall into. But beware, not all mortgage brokers will, or can do these important things!
Wholesale Rate Volume Discounts
Just like in other areas of purchasing and economics, the more volume that you buy of something, the better deal you get on each unit purchased. It’s no different with mortgages. The more volume that a broker does with a lender, the better rate discounts they will get, and these discounts can be passed down to you, the mortgage applicant.
But not all mortgage brokers receive the same mortgage rate discounts and many brokers do not even deal with all the right lenders to provide the lowest mortgage rates in Ontario. A broker whose company has high volume should be able to provide the lowest mortgage rate volume discounts.
Top Secret: Mortgage Rate Buy-Downs
This is the big secret in the mortgage industry. Brokers do have the ability to sacrifice their lender paid commission to ‘buy down’, or lower your rate. Usually, between 40% – 50% of the lender paid, broker commission is required to lower the rate by 0.10%. Although with some excellent lender products, the same buydown can lower a rate by 0.20%.
We will quote you a rate from the (1) Lowest rate lender with the most volume discounting, and then (2) Buy down the rate to its maximum allowable point.
We don’t do this on occasion, we do this consistently. This is how you get the best Kitchener mortgage rates up front, without the haggle. If a mortgage broker isn’t doing both of these things to get you the lowest mortgage rates, then you will not obtain your best savings.
We find that when the lowest mortgage rate possible is provided up front, an excellent trust is built which lays the foundation for a long-term relationship that will continue to save you the most over the lifetime of your mortgage. More on this point of the mortgage relationship soon.
AS IMPORTANT AS RATE: Mortgage Features and Flexibility
No matter what mortgage industry expert you talk to, there is always more to a mortgage than only rate – just like there is more to a computer, or a phone, or a car than only cost. The key is about finding the best value, and therefore the best savings on your mortgage.
What’s the point of getting the best mortgage rate if the mortgage is has sneaky built-in features designed to cost you way more down the road? Here are are few of the things to look out for.
High penalties. For example, most variable rate mortgages come with a 3-month interest rate penalty. But some ‘no frills’ variable rate mortgages will apply a 3% penalty to leave the mortgage. This is a massive difference, and considering that most mortgage holders tend to make changes during their mortgage term, any savings derived over a few years from a lower rate, could easily be swallowed up and then some in one single day. The same kind of penalty differences can lurk in fixed rate mortgages as well. Beware.
Lower prepayments. While most mortgage lenders offer 15% – 20% per year prepayment privilege, there are some mortgages that only have a 5% per year prepayment privilege. While this may not seem like a big deal for some, things change over time and you may want to utilize these features at some point over your mortgage. Moreover, if paying out a mortgage completely, a prepayment feature can often lower a penalty cost by the corresponding prepayment % availability.
Collateral charge. The collateral charge mortgage is not as bad as it once was, since it is now easier to switch out of a collateral mortgage. Essentially the collateral feature can make it easier to open a secured line of credit against the home at a later date, however, it can also make it more expensive to renew with a different lender. This is often surprising when customers are re shopping for the best rate on their renewal. Whether or not a collateral mortgage makes sense for you, if this feature exists, it should be disclosed to you because it could potentially cost you down the road.
We provide full disclosure if something is lacking or could cost you more than a standard mortgage. With this said, we rarely have to sacrifice mortgage feature quality to get you the lowest rate.
The Value of Long-Term Service
In some ways, shopping for a mortgage is a bit like shopping for a car. Both are major purchases, and often if you visit more than one dealer, you may find a better deal. However, this is where things really start to diverge.
A mortgage is not like a car, because, not if, but when something changes with your mortgage, you’ll need someone to count on that can continue to provide the most honest, lowest cost strategies. In other words, getting the lowest rate is only the first step in long-term mortgage savings. KEEPING the lowest rate over time, and avoiding penalties and other nasty high-cost surprises is what will make all the difference over the life of your mortgage.
I am often surprised at the logic some brokers use, which is ‘My rates are a bit higher, but my service over time will save you more’. Think about this one. If the rates are higher today, do you think they will be lower in the future, such as on the renewal date?
We provide the lowest rates today, AND for the life of your mortgage. When there are changes we provide full-service advice that will save you the most for your situation.
Mortgage Strategies: Compounding Your Best Rate Savings
There is always good value in looking at alternative ways to save on your mortgage over the long term. The two main strategies that are offered by some of the leading full-service Brokers in the market are:
Mortgage Freedom Faster Plans.
This kind of planning involves looking for creative ways to use your prepayment privileges to pay down the mortgage faster, and thus save on interest. For example, if you consolidate a car loan into your mortgage – you would continue making the same car loan payment amount, but towards the mortgage instead. This can lower the overall interest paid and help you over the long run because the additional payment should not end until the mortgage is gone.
Variable Rate Mortgage Hedge
One of the most practical strategies is to take advantage of a lower rate variable mortgage. By using the pre payment privileges, the variable rate mortgage can be paid AS IF it were a higher payment fixed rate mortgage. This additional prepayment of the variable adds up over time and can lead to thousands in savings, and is an excellent way to hedge against the added risk of a variable rate.
Another example is using any pay raise or bonus, directly towards the mortgage.
New Mortgage Opportunities.
Over the years of your mortgage term, there may be opportunities to save you on your mortgage based on changes in the market. This is especially true in a market where rates are declining. But there are other times when money saving opportunities can come up. This can potentially save you over the life of your mortgage, but these market-based savings are of course not guaranteed.
There are a few advanced Brokers in the market that can help their clients utilize the mortgage, in tax-friendly ways, as a tool to help their clients build wealth faster.
Using low-interest debt to build wealth faster is something that just about every large and successful business does, even if they are cash rich. While this type of mortgage service is only appropriate for some clients, the results of a successful strategy can far exceed the savings of a lower rate mortgage.
We offer mortgage freedom faster planning, long-term mortgage monitoring for further savings and mortgage wealth-building strategies.
I offer my personal commitment to providing all of these services at the highest levels given my vast experience, a Certified Financial Planning (CFP) accreditation and most importantly, a proven track record.
When the mortgage rate is at its lowest for your situation, and the mortgage product is flexible, and the long-term service offers maximum opportunity for further savings and wealth building, this is where you’ll end up saving the most possible
As founder I invite you to call me today at 519-568-3377 to get a rate quote based on your unique situation and start a conversation that will lead to many years of prosperity in your home or investment property.
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