Popular Ottawa Mortgage and Housing Information

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Will Mortgage Rates in Ottawa go down in 2024?

The Ottawa Housing Market Forecast in 2024

What is the maximum purchase price in Ottawa with $120,000 of income?

How Much Income is Needed to Buy a $500,000 Home in Ottawa?

How Much Income is Needed to Buy a $1,000,000 Home?

Factors that Determine Ottawa Mortgage Rates

Fixed and Variable Mortgages: Which Rate is Best?

4 Step Mortgage Pre Approval Process in Ottawa

Banks Reviewed: What’s the Best Bank for a Mortgage in Ottawa?

Advantages and Disadvantages of Using a Mortgage Broker

Will Mortgage Rates in Ottawa go down in 2024?

As of November 2024,  Ottawa mortgage rates have dropped well off their 2023 highs, but are fluctuating somewhat as inflation is taking longer than expected to drop. With this said, the spending conditions in Ottawa and across Canada continue to deteriorate, so likely, this will result in reduced inflation and a general downward trend in mortgage rates in 2024.

The one certainty regarding mortgage rates we can forecast is that the Bank of Canada won’t drop rates until inflation is contained for at least 3 months, or if there is a major economic event. As the economy slows and inflation drops, this can cause the fixed rate mortgage to fluctuate downwards as we draw closer to the first Bank of Canada rate drop. Once the Bank of Canada drops rates, the variable rate mortgage will also drop.

The Ottawa Housing Market Forecast in 2024

The Ottawa housing market in Winter 2024 has seen an increase in activity, given reduced fixed rate mortgages. Further, anticipation of lower mortgage rates is creating optimism in the housing market. Given this we see price levels balancing out and then increasing later in 2025. Sales activity is projected to be up 20% – 30% in Ottawa compared to 2024.

The local housing market in Ottawa is supported by a diverse economy, with the Federal government as a cornerstone.

What is the maximum purchase price in Ottawa with $120,000 of income?

The maximum purchase price in Ottawa depends on income and credit but also down payment. For the 5% down payment we include a CMHC fee and rely on a maximum 25 year amortization, and for the 20% down payment there is no mortgage insurance premium and we use a 30 year amortization:

5% down payment: $500,000 maximum purchase price.

20% down payment: $600,000 maximum purchase price.

How Much Income is Needed to Buy a $500,000 Home in Ottawa?

To buy a $500,000 home in Ottawa, using the minimum down payment of $25,000 the minimum pre tax income needed is approximately $120,000.

If a 20% down payment can be provided, the minimum income as of November 2024 is approximately $95,000.

How Much Income is Needed to Buy a $1,000,000 Home?

For a $1,000,000 purchase in Ottawa, a minimum of 20% down payment is needed. For any purchase of $1,000,000 or more, this is a National requirement.

The total family income required, with a 20% down payment is approximately $190,000.

These are estimates based on the November 2024 market and a personalized pre approval is required for accurate results.

Factors that Determine Ottawa Mortgage Rates

Key to ensuring the best mortgage rates Ottawa is understanding what factors go into determining a mortgage rate. Below, we will look at the main factors that influence rates to help you understand how you may lower your rate further.

Property and Mortgage Type

There are various property types, including owner occupied property valued less than $1,000,000, owner occupied property over $1,000,000, second homes, and recreational and investment properties. All of these different property types can affect your rate.

In general, owner occupied homes purchased for less than $1,000,000 will enjoy some of the lowest rates. Properties that are purchased for over $1,000,000 are seen by financial regulators as ‘riskier so the banking system has been set up to price a slight premium into these rates – in some cases as much as .25% and in other cases, there is no premium. Second home and cottage properties can really depend on what the property is like, so custom quotes should always be sought for these property types. Frental/ investment properties in 2023 have seen the highest premium on rate at about .10 higher than the $1,000,000 property (uninsured) rates.’

Down payment

Many are surprised to hear that it’s not income or credit that can further lower rates, but the down payment’s size and structure. Specifically:

CMHC or ‘high ratio mortgages’ typically have the lowest rates because the lender or bank is protected against default. The borrower pays for this mortgage insurance protection and the fee currently ranges from 2.8% – 4% depending on how much down payment is used.

At 20% down payment, there is no CMHC fee. Rates can be a bit higher with 20% down payment because this is the minimum down payment to avoid mortgage insurance and leaves the lender open to the most risk.

Insurable mortgages typically include mortgage insurance premiums, but with 20% down payment or more, the lender pays the premiums, and the borrower doesn’t see this cost. The cost is reflected in the rate, so the mortgage rate drops as the down payment goes up and the lender incurs less cost.

More specifically, the rate drops with many mortgage lenders as the down payment or equity available (on mortgage renewal or mortgage refinance) increases from 25% to 35%.

Mortgage Size

As mortgage size increases, so do the profits that banks and mortgage brokers earn. As profits increase, additional profits can be ‘invested’ back into the mortgage to lower the rate. For example, if on an $800,000 mortgage, the lender will earn $8,000, they may opt to earn $4,000  instead, and use the other $4,000 to lower the rate. They will do this to help remain competitive and secure the business.

On the other hand, some mortgages that are $200,000 and under may not see the same kind of discounting because, after the cost to process the mortgage, there may not be as much revenue left for the lender or broker to lower the rate. While some discounting can still happen, larger mortgages result in higher revenue where higher discounts are usually seen.

Credit Rating

The credit rating in Canada range between 400 – 900. Typically, those with credit scores over 700 will get the best rates. For most banks, the lowest rates will be offered if your score is past 680-700 benchmark.

Also, when scores are in the 700 + range,  there is more ability for lenders to make exceptions on approvals – such as a very new job or probationary period. Usually, prime rate mortgages are approved with a credit score above 650. For mortgages in the low 600 range or lower, this could be an alternative type of mortgage with a higher rate.

Fixed and Variable Mortgages: Which Rate is Best?

Approximately 75% of borrowers in the Ottawa-Carleton area have a fixed mortgage rate. But does this mean it’s the best rate? There are a few basic things to understand about these mortgage options, and ultimately, the best decision is the one that aligns with your belief for the future of mortgage rates in Ontario.

Fixed Mortgage Rates

• Come in a variety of terms, typically from 1-10 years, with the 5 year fixed term being the most popular in 2024.
• Shorter term fixed mortgage rates may be selected to renew the mortgage sooner, potentially at lower mortgage rates. However, the shorter the term, the higher the rate in 2024.
• Provide predictability and peace of mind for the length of the term, and rates will not fluctuate within the term. However, after the term is over, the mortgage is renewed at prevailing market rates.

Variable Mortgage Rates

• Variable rates will fluctuate over time, along with rate increases and decreases from the Bank of Canada.
• Over 99% of variable mortgages are in 5 year variable terms, and the penalty to exist the term is typically a  3 month interest penalty.
• Studies have shown that over the long term of 40+ years, variable rates have saved borrowers more than fixed. However, there are periods like we are seeing in 2024 where variable can cost more than fixed rates, and also, if the fixed rate is locked in at the right time, borrowers can potentially save with fixed rates.
• Variable mortgage rates can be locked into a fixed rate during the mortgage term and may be used as a tool to ‘ride down the market’ if rates start to drop in 2024 or 2025.

4 Step Mortgage Pre Approval Process in Ottawa

1. Complete an introduction call and get competitive mortgage options,  questions answered, and a preliminary pre approval within 5-10 minutes.
2. Complete the secure online mortgage application.
3. Upload documents to the secure portal, that corresponds with the application information.
4. Application is reviewed along with the documents and the formal pre approval is issued.

From here, it’s about monitoring to see if we can provide a lower rate.

If the pre approval is done well, it will be the main part of the entire approval process. If more work is done upfront, it can help to bring up questions and position the application properly before there is a chance for error. But with the latest technology and efficient communications, it only takes about an hour or so for this entire pre approval process. Ofcourse, there is as much time as is needed to answer questions and explain the mortgage can be had depending on individual needs.

Banks Reviewed: What’s the Best Bank for a Mortgage in Ottawa?

Ottawa is home to the 5 major Canadian banks, but also several local credit unions.

Ottawa Credit Unions

Institutional/ Discount Lenders Available in Ottawa

Advantages and Disadvantages of Using a Mortgage Broker

Over the past few years, more and more home owners in Ottawa have chosen to work with a mortgage broker.  This trend continues in 2023 as borrowers seek lower rates and are not settling for the first or even second rate offered directly by their bank.

If you’re wondering if working with a mortgage broker may be right for you, the following will review this decision’s potential advantages and disadvantages.

Mortgage Broker Disadvantages

• Not as familiar as the big banks.
• Brokers may require more information, as the bank already has considerable information on its clientele.
• Many brokers do not have a lot of experience, so more diligence may be required to ensure the competency of the broker.
• Some mortgage brokers do not have access to many lenders. There is a small % of brokers who offer rates from a wide range of lenders.

Mortgage Broker Advantages

• There is typically no cost for prime rate/ low rate broker services.
• A broker should be able to beat the existing rate quote from your bank, sometimes by a wide margin.
• Brokers work with big banks and other large and trusted lenders who actually hold the mortgage. Like an insurance broker, a mortgage broker helps with finding the right lender.
• Some mortgage brokers may offer value added advice on term selection, and, after the mortgage closes ways to save money on the mortgage. Whereas it may not be in the Banks interest to look for more ways for their customers to save.
• An experienced mortgage broker can make the process smoother and more efficient because they are only focused on mortgages and their entire business is set up to manage the mortgage approval process properly.

About Brent Richardson and Altrua Financial

Hi, I’m Brent Richardson, author of this article and Principal Mortgage Broker/ Owner of Altrua Financial. There are many ways for a lender to reach Ottawa homeowners looking for great mortgage financing options. However, I believe that education and customer empowerment are best.

I consider myself fortunate to have the opportunity to provide this information and would be happy to answer your specific questions and provide you with a pleasant, best-rate mortgage transaction. Connect with Altrua today or book an appointment in the calendar just below.