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Conventional vs. high-ratio mortgages: which is cheaper?
On LowestRates.ca, you can submit a mortgage application for different types of mortgage products. However, the two main options for most homebuyers are conventional and high-ratio mortgages. A conventional mortgage contract requires the homebuyers to put down at least 20% of the purchase price of the home as a down payment.
A high-ratio mortgage, on the other hand, means the homebuyer has put down less than 20% of the price of the home. With a high-ratio mortgage, homebuyers are required to purchase mortgage insurance. There are three providers of mortgage default insurance in Canada: the government-owned Canada Mortgage and Housing Corporation (CMHC), or private insurance companies Sagen and Canada Guaranty.
Interest rates for high-ratio mortgage contracts are often lower, but the cost of mortgage default insurance adds to the overall cost of the mortgage.
Conventional 5-year fixed mortgage rates vs. high ratio 5-year fixed mortgage rates in New Brunswick
|Date||Average Conventional Rate||Average High Ratio Rate|
Last Updated: May 1, 2021
Fixed rate vs. variable rate mortgages: which is cheaper?
Lenders charge interest on your mortgage, and interest rates can be fixed or variable. Understanding the difference and choosing wisely can help you save money.
With a fixed-rate mortgage, your interest rate stays steady throughout your mortgage term. In Canada, mortgage terms can range from six months to 10 years. With a variable rate mortgage, the interest rate may change depending on market conditions during the mortgage term.
A variable rate mortgage for your N.B. home purchase does carry some risk, as market conditions are not always predictable. The greater certainty of a fixed-rate mortgage is what makes this the most popular choice for the majority of Canadian homebuyers.
Over the last year, the best fixed mortgage rates in N.B. have been lower than variable mortgage rates in N.B. (and Canada as a whole). Interest rates are always subject to change, so regardless of the mortgage product you choose, be sure to check and compare current mortgage rates in N.B. as you shop for your new home. Take a look at our chart of 5-year fixed mortgage rates in N.B. vs. 5-year variable mortgage rates.
5-year fixed vs. 5-year variable mortgage rates in New Brunswick
Last Updated: May 1, 2021
Factors that affect your New Brunswick mortgage rate
As a prospective homebuyer, one of your top questions is probably along the lines of, “What are current mortgage rates in N.B.?” But before you start comparing rates, it’s helpful to understand how banks review mortgage applications and set their interest rates.
Lenders take several factors into account when deciding whether to approve you for a home loan, and what rates they can offer you. So it’s not enough to ask, “What is the average mortgage rate in N.B.?” Your rates will also depend on individual factors unique to your situation.
Here are the most important factors banks will consider in setting mortgage interest rates for your N.B. home purchase.
Down payment: If you want to score a low mortgage rate in N.B., one of the most important factors is the size of your down payment. Across Canada, there are minimum down payment rules depending on the price of the home:
- A home that costs $500,000 or less: the minimum down payment is 5% of the purchase price
- A home that costs $500,000 to $999,999: the minimum down payment is 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: the minimum down payment is 20% of the purchase price
No matter the price of your home, a down payment of at least 20% is an important threshold. Not only are you more likely to qualify for cheap mortgage rates for an N.B. home, but you won’t have to buy mortgage default insurance. It’s also important to note that mortgage insurance isn’t available for homes that cost more than $1 million, so a minimum 20% down payment becomes mandatory at that price point.
Debt service ratios: Lenders use two types of ratios to calculate the amount of debt you have relative to your income. These figures will typically also factor into any online N.B. mortgage affordability calculator you use to help you set your budget as you shop for your new home. Here’s a guide to each type of debt service ratio.
- Gross debt service ratio (GDS): The GDS is your housing costs divided by your gross annual income (gross means before taxes). This ratio shows lenders how much of your income will be used to cover your housing if you purchase the home. Banks and mortgage brokers in N.B. consider all of the following part of your total housing costs: mortgage payments (principal and interest), property taxes, heat, and half of any condo fees (if your home is a condo). Banks typically want to see a GDS ratio of less than 35% so they can feel confident that you will repay your mortgage loan.
- Total debt service ratio (TDS): The TDS ratio adds together your total housing expenses included in the GDS calculation, plus any other monthly debt repayments you need to make, and divides the total by your gross annual income. Lenders prefer borrowers that spend less than 42% of their gross annual income on debt repayment. Examples of the kinds of debt lenders include when calculating your TDS include auto loans, personal loans or lines or credit and credit cards.
Credit score: Having a high credit score is a great way to communicate to banks that you’re a safe bet when they lend you money. Some lenders do offer specialized mortgages in N.B. for borrowers with bad credit, but they typically adjust their rates upward with these products to reflect the greater risk. The higher your credit score, the better your mortgage rate is going to be. Credit scores can range from 300 to 900, with higher scores indicating a longer and more positive credit history. If you need to purchase mortgage insurance from the CMHC (which is required if your down payment is below 20% of the home’s price), CMHC requires a minimum credit score of 680 to qualify. If your credit score is too low for a traditional lender like a big bank or credit union, you may have to look at mortgage rates from private N.B. lenders.
Employment and income: N.B. mortgage agents and lenders will want to know how much income you earn from all sources to understand how you will repay your mortgage loan. You will be asked for proof of income from your job as well as any income from investments or rental properties. Banks typically see a full-time, salaried job that you’ve worked at for several years as the safest type of employment income, compared to seasonal, part-time or temporary work. If you’re self-employed, you’ll need to provide more documentation of your income and business. Typically this includes tax returns for the previous three years, proof that you are current on all HST or GST payments, articles of incorporation, proof of principal ownership in the business, GST or business license, your business’s credit score, and other business financial records.
Typical mortgage amount in New Brunswick
The size of your mortgage depends on a few factors: the location of your new home, your down payment, and your mortgage interest rate. (Any N.B. mortgage calculator will ask you to plug in these figures).
The average price of a home in the province is $205,074 according to January 2021 Canadian Real Estate Association (CREA) sales figures for all home types.
A homebuyer making a 20% down payment ($41,014) on an average New Brunswick home (with a purchase price of $205,074) will have a mortgage amount of $164,059. This figure doesn’t include interest since that depends on your mortgage interest rate. Keep in mind that if your down payment is below 20% of the home’s cost, you’ll be required to buy CMHC mortgage insurance.
The size of your mortgage is important, but it’s not the only factor to consider in determining how a new home purchase works with your budget. The size of the monthly mortgage payment is even more important for most homebuyers. Try plugging different down payment sizes, mortgage amounts and amortization periods into an N.B. mortgage payment calculator to find out what your monthly mortgage payment will be in different scenarios.
New Brunswick’s housing market and home prices
Homes in the northern region of the province have the lowest average price in N.B., at $129,649, while homes in Greater Moncton have the highest average price in the province, at $236,630. The housing markets in Fredericton and Saint John sit in between, with average home prices of $215,723 and $199,853, respectively.
Even with the Greater Moncton housing market heating up in recent years, New Brunswick homes of all types remain among the most affordable in Canada. Sales data in January 2021 show single-family detached homes in Greater Moncton selling for $236,000 on average, according to statistics compiled by the Canadian Real Estate Association (CREA). This represents a year-over-year increase of 22.7% over January 2020.
New Brunswick closing costs and land transfer tax
Closing costs are all the assorted expenses involved in closing the deal on your new home. Homebuyers should expect to spend about 1.5% to 4% of the home’s purchase price on closing costs (excluding the down payment). Closing costs can vary from one home sale to the next, but usually include items like:
- Home inspection fees
- Title insurance
- Property appraisal costs
- Legal services fees
- Homeowners insurance
- CMHC mortgage insurance (if your down payment is less than 20%)
- Good and services tax (GST) or harmonized sales tax (HST) if your home or condo is brand new
New Brunswick also has a land transfer tax of 1% of the property’s appraised value. (Keep in mind this may be different from the home’s purchase price). This means the buyer pays $1,000 in land transfer tax to the province for every $100,000 of the home’s assessed value.
Your questions about New Brunswick mortgages, answered.
What’s the difference between a mortgage term and an amortization period?
Mortgage term: This is the length of your current agreement with a specific lender. The length of the term is spelled out in your mortgage contract, along with the rules determining your interest payments for that period (whether fixed or variable). Mortgage rates often vary depending on the length of the mortgage term, which is why you might see 5-year mortgage rates for N.B. that are different from 6-month mortgage rates for N.B. as you shop for your mortgage. The most common mortgage term in Canada is five years.
Amortization period: This is the full life of your mortgage, the total amount of time it will take you to pay off the loan, including interest. The maximum amortization period in Canada is 35 years, but the CMHC caps the amortization period at 25 years if you need to buy mortgage insurance. Remember, this is required if your down payment is less than 20% of the home’s purchase price.
What’s the difference between an open mortgage vs. a closed mortgage?
Deciding whether to opt for a closed or open mortgage is another decision you’ll need to make when buying a home. The main difference between an open mortgage and a closed mortgage is the level of flexibility allowed in the repayment schedule. Closed and open mortgage rates for N.B. home purchases will also be different.
Open mortgage: An open mortgage offers the most flexibility around your repayment time frame. You can repay your loan faster than the minimum monthly payment schedule if you choose, without facing penalty fees. The tradeoff for this enhanced flexibility is that open mortgage rates in N.B. are typically higher. This type of payment structure may be the best choice for you if you expect to move soon, refinance, or receive a large windfall (like an inheritance) that you can use to pay off your mortgage early.
Closed mortgage: Closed mortgage rates in N.B. are typically lower than open mortgage rates. With a closed mortgage, you repay your loan on a fixed schedule. If you make payments above the monthly minimums, you could face stiff penalties. Penalties can sometimes cancel out any savings on interest you might earn by trying to pay off your mortgage early. Closed mortgage terms and conditions vary by lender, and some do allow accelerated payments up to a maximum amount without charging penalties. Be sure to familiarize yourself with the lender’s rules before signing your mortgage contract.
How much does it cost to live in New Brunswick?
Overall, New Brunswick residents benefit from a lower cost of living than much of Canada, including home prices that are affordable compared to many other provinces. The average sale price for all types of New Brunswick homes is $205,074, according to January 2021 sales data from the Canadian Real Estate Association (CREA). The cost of living in New Brunswick will also depend on individual factors like whether you rent or own your home and whether you own a car or get around by public transit and bicycle. If you do own a private vehicle, New Brunswick auto insurance rates are among the most affordable in Canada, at $867 per year, on average.
New Brunswick also offers high quality of life, as the largest of Canada's three Maritime Provinces. It's a must-see destination for nature lovers, offering a whirlwind of natural wonders, including the Bay of Fundy, which has the world's highest tides (up to four-storeys high!), and the Saint John River. Not surprisingly, the New Brunswick economy is centered around natural resource industries such as forestry, mining, fisheries, and mixed farming. It's also home to the McCain Foods empire — one-third of the world's French fries come from New Brunswick's Florenceville-Bristol.
How much does getting a lower interest rate matter in New Brunswick?
Home buyers will want to find the best mortgage rates for N.B. in 2021, but there are other factors beyond interest rates to consider as you compare mortgage products.
Prepayment privileges: This allows you to pay off your mortgage loan early without being charged penalty fees. Penalties for prepayment can be high — above what you might save on interest — so be sure you understand the specific rules of your mortgage contract.
Penalties: Many mortgage contracts assign penalty fees for breaking your mortgage early (this can happen if you refinance or move). Some homeowners find out about penalties the hard way, and end up paying them after refinancing for a lower interest rate. If this happens, you may end up canceling out any savings from a lower rate by incurring the penalty fees. Again, make sure you read the fine print of your mortgage contract to prevent this!
Portability: This lets you transfer your mortgage from one property to another if you move without suffering penalty fees. Typically, porting your mortgage to a new home is combined with an additional mortgage loan for the new property.
Your questions about LowestRates.ca, answered.
How are mortgage rates determined on LowestRates.ca?
So, what is the best mortgage rate in N.B.? We’ll help you find out. LowestRates.ca works with 75+ Canadian banks and brokers to bring you competitive mortgage rates. 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 interest rates for N.B. 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).
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.