Three months worth of interest payments or an interest rate differential fee? You should do the math.
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Conventional vs. high-ratio mortgages: which is cheaper?
You can start a quote for a number of different mortgage products on LowestRates.ca, with the two main types being conventional and high ratio mortgages. The key difference between the two is whether you’re able to put down 20% of the purchase price as a down payment. Conventional mortgages refer to mortgages with at least 20% down. Your mortgage is considered high-ratio if you put less than 20% down, which also means you need to purchase mortgage insurance. Below, you’ll find a comparison of high ratio versus conventional mortgage rates in Alberta over the past several months. Keep in mind, high ratio mortgage rates are often lower because these mortgages are insured by the CMHC and the premiums will get rolled into your monthly mortgage payments. It’s important to speak with a broker or adviser about which option — conventional or high-ratio — works for you.
Conventional 5-year fixed mortgage rates vs. high ratio 5-year fixed mortgage rates in Alberta
|Date||Average Conventional Rate||Average High Ratio Rate|
Last Updated: May 1, 2021
Fixed rate vs. variable rate mortgages: which is cheaper?
Since 2015, variable rate mortgages in Calgary have generally beat out fixed rates on LowestRates.ca. But in 2019 the trend shifted, with fixed-rate mortgages in Calgary boasting lower interest rates than ones with variable rates. However, as of January 2021, both fixed and variable rates are now on par with each other. So, whether you go with a fixed or variable rate on LowestRates.ca, you’re getting a great deal.
5-year fixed vs. 5-year variable mortgage rates in Alberta
Last Updated: May 1, 2021
Factors that affect your Calgary, Alberta mortgage rate
Lenders look at the big picture when assessing your eligibility for a mortgage. Here are some of the key things lenders evaluate when looking over your application and proposing a mortgage rate for a Calgary home.
Down payment: The size of your down payment will heavily influence your mortgage rates for a Calgary house, townhome or condo. When buying a home in Canada, your down payment must be between 5 to 20% of the total cost of the property. Here are the federal government’s guidelines around this:
- A home that costs $500,000 or less: 5% of the purchase price
- A home that costs $500,000 to $999,999: 5% of the first $500,000 of the purchase price, and 10% for the portion above the purchase price above $500,000
- A home that costs $1 million or more: 20% of the purchase price
If your down payment is less than 20%, you’ll need to purchase CMHC mortgage insurance.
Debt service ratios: Lenders take debt ratios seriously when calculating mortgage rates. They are grouped into the following two categories:
- Gross debt service ratio (GDS): Lenders calculate an applicant’s GDS ratio to determine whether they can easily cover their housing costs. They’ll add up how much of your paycheque goes towards your mortgage, property taxes, heating costs, and 50% of condo fees (if applicable) then divide that by your gross annual income. Typically, lenders want to see a score of 35% or less.
- Total debt service credit ratio (TDS): Similar to the GDS, lenders are interested in your TDS ratio so they can feel confident in your ability to make monthly payments. Your TDS ratio is your GDS ratio plus other monthly payment responsibilities, such as credit card debt, loan payments and car payments. The total is then divided by your income. Lenders look for a score of 42% or less.
Credit score: Your credit score is important because it demonstrates to lenders that you’re a responsible borrower. Credit scores run from 300 to 900, but if you’re applying for a mortgage loan, you’ll likely need a score of 650 or above. The higher your score, the more options you’ll have for lenders and the better the chance you’ll have at finding the lowest mortgage interest rates in Calgary.
Income: Another key criteria for mortgage eligibility is your income. If you’re a salaried employee, lenders will review your annual income as well as any rental income or investments. They’ll also consider your employment history. If you’re self-employed, lenders will examine tax returns from the last three years, your personal and business credit scores, your business or GST licence, and any other supporting documents, including income statements, cash flow statements and balance sheets.
Typical mortgage amount in Calgary, Alberta
Your total mortgage amount depends on where you’re moving to, the size of your down payment, and the current mortgage interest rate in Calgary. If your down payment happens to be less than 20%, you’ll also have to factor in additional costs due to the required CMHC mortgage insurance.
As of February 2021, Calgary MLS stats show the average house price is listing for $474,234. If a buyer put down 20%, that would leave them with a mortgage of roughly $379,387.
Calgary, Alberta’s housing market and home prices
Here's an overview of mortgage rates and house prices in Calgary.
The housing market for single-detached homes has remained relatively steady this past year. The average single-detached home, as of February 2021, is $561,830.
Townhouses, on the other hand, went significantly down in price in May 2020. Although prices have since begun climbing upwards, they still cost less than they did just one year ago. Currently, the average townhome in Calgary goes for $391,428.
There are about 2,500 listings in the last month, with homes typically sitting on the market for 36 days.
Calgary, Alberta closing costs and land transfer tax
To seal the deal when it comes to a new home, you’ll need to pay some closing costs and a land transfer tax. To avoid any unexpected financial expenses, it’s best to budget 1.5% of the home’s purchase price (not including the down payment) so you can handle any additional costs that come your way.
Some of these costs might include:
- Title insurance
- Mortgage default insurance
- Property valuation fees
- Home inspection fees
- Legal fees
- Home insurance
Alberta also had a land transfer tax, which means that when you purchase a property or piece of land, you’re required to pay a fee upon closing of the sale. The amount you’ll have to pay depends on the value of your property.
Your questions about Calgary, Alberta mortgages, answered.
What’s the difference between a mortgage term and an amortization period?
Mortgage term: This is the length of time you’ll be committed to both your lender and the mortgage contract. Mortgage terms typically run from six months to 10 years, but on average last five years in Canada. When the term ends, you will have the option to renew the contract at a new rate.
Amortization period: This refers to the length of your mortgage, meaning the total amount of time it will take you to pay down your loan. The maximum amortization period in Canada is 35 years, but if you’re required to buy CMHC mortgage insurance (because your down payment was less than 20%), then your maximum amortization period will be 25 years.
What’s the difference between an open mortgage vs. a closed mortgage?
Open mortgage: Open mortgages are appealing for their flexibility — they’re designed for homeowners who want to increase their mortgage payments, pay down their mortgage early, or shortly relocate. Open mortgages can be considered advantageous because they can be paid off early without incurring any fees. One hitch? By comparison, mortgage rates in Calgary will be higher with an open mortgage than a closed mortgage.
Closed mortgage: These mortgages typically offer the cheapest mortgage rates in Calgary. By choosing this option, homeowners will be required to make fixed payments for their entire term. Refinancing, renegotiating, or paying down a mortgage early can be risky because of the penalties involved. Some lenders do make exceptions when it comes to accelerated payments on the other hand. You’ll need to review the terms and conditions of your contract carefully.
How much does it cost to live in Calgary, Alberta?
If you do opt to purchase a home instead of renting, you’ll need to consider more than just the cost of the average mortgage rate in Calgary when creating a budget.
Next to housing, a large portion of Calgarians' monthly incomes goes towards transportation costs. You’ll need to figure out whether you’ll be driving or commuting. If you plan on being a commuter, it’s a good idea to familiarize yourself with Calgary’s transit network, which consists of buses and two light rail transit lines, known as the C-Train. If you’re a committed driver, you’ll want to research auto insurance rates, which you can do here at LowestRates.ca.
How much does getting a lower interest rate matter in Calgary, Alberta?
Finding the current mortgage rates in Calgary is just one step of the process. You’ll also want to explore prepayment privileges, penalties and portability.
Prepayment privileges: These privileges allow you to pay down your mortgage faster than originally planned without being charged a penalty for doing so. Banks and brokers will each have their own prepayment terms, so read the fine print when signing your contract.
Penalties: If you unexpectedly find yourself needing to move or refinance, you could get slapped with a penalty in the thousands of dollars. Sometimes homeowners are willing to pay the penalty fee if it means they can negotiate a better rate, but you’ll need to do the math to determine whether doing so in your best interest.
Portability: To avoid penalties, you may want to negotiate a portable mortgage. That way, if you move before your mortgage term is over, you can transfer the mortgage to your new property and combine it with an additional mortgage loan.
Your questions about LowestRates.ca, answered.
How are mortgage rates determined on LowestRates.ca?
LowestRates.ca works to bring you the best mortgage rates from 75+ banks and brokers in Canada. We work with our partners to obtain their best deals and offers, and then we let them compete for your business. All you have to do is answer a few questions, and in minutes you’ll be provided with today’s mortgage rates. There’s no obligation, but you can choose to speak with our broker partner to secure your best rate and see if you're eligible for more savings.
Is it safe to get a mortgage online?
Yes, it’s safe — you no longer need to visit a bank branch or mortgage broker’s office in person to apply for a mortgage. It’s becoming increasingly common for Canadians to apply for mortgages online. LowestRates.ca only works with reputable, trustworthy financial institutions. Your credit score won’t be affected and your information is secure. We don’t share your information with anyone unless you want to connect with a mortgage broker. We take care of the heavy lifting by comparing the market for you and can connect you with the best mortgage lenders in the country.
How do I know I’m getting the lowest rate?
We have a strong selection of lenders on LowestRates.ca including the big banks and many independent providers and we’re adding more lenders all the time. This ensures we’re always delivering you a competitive rate.
Even if you’re not ready to commit to anything, you can use our site as a starting point for research (it’s totally free, and you’re under no obligation to speak with our broker-partners).
The better informed you are, the more likely you'll negotiate a better deal for yourself. And, really, that’s what we care about the most.
This offer condition can save you a lot of headaches on existing homes and even new builds.