Ellen Roseman: If you plan to break your mortgage, beware the penalties
If you’re planning to sell your house or break your mortgage before the end of your term, there could be fees to pay.
On average, Canadians save thousands of dollars per year comparing rates with us.
We have some information that you, prospective homeowner, might find useful. And unlike most secrets, we’re inviting you to share this one with all of Canada.
Banks rarely offer their most competitive mortgage rates up front. This little-known fact often forces Canadians to negotiate discounts over the phone or in person. You don’t need the hassle.
By comparing mortgage rates on LowestRates.ca, you can skip the “back-and-forth” all together and get the best rates available in your area right away.
Our users save thousands of dollars a year on their mortgage rates, and we want you to join them.
With LowestRates.ca, you’ll be able to compare the best mortgage rates from over 30 banks and brokers across Canada. Whether you live in Ontario, Alberta, British Columbia, Quebec or anywhere in between, our mortgage rates are tailored to your needs.
In fact, LowestRates.ca mortgage rates average more than two whole percentage points lower than the bank rate and our users have the potential to to save thousands of dollars each year on their mortgage payments.
With numbers like that, it’s no surprise that Canadians are increasingly using comparison sites to find the lowest mortgage rates in the country.
LowestRates.ca can connect you with brokers who have access to a variety of lenders. All you have to do is fill out the form above to try our no-obligation, free service, and you could be on your way to saving big on your next home.
When we say, ‘just like that’, we mean it — access the best mortgage rates in seconds.
That’s right — our service is absolutely, 100% free for our users. Comparing mortgage rates won’t cost you a dime.
Enter your postal code to find competitive mortgage rates for the province or territory you live in, and then pick the best rate. It's that simple.
We're impartial. At LowestRates.ca, we allow banks and brokers to present their best mortgage offers to you on an even and unbiased platform.
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Mortgage rates on our site have fallen steadily over the past few years. In fact, our rates continue to average more than 2.5 percentage points lower than the average bank rate. On a $400,000 mortgage, this can add up to more than $170,000 in savings over the life of your mortgage loan.
On average, LowestRates.ca’s 5-year fixed mortgage rates are about 2.6 percentage points lower than the bank rate. On a $400,000 mortgage with a 25-year amortization period and a down payment of 20%, this would add up to savings of
|Month||Our average rate||Average bank rate|
One of the biggest decisions you’ll make when hunting for a mortgage is whether to go with a fixed or variable rate. On that note, we have more good news for you. Fixed and variable mortgage rates have been almost identical on LowestRates.ca since the beginning of 2019.
This means that no matter which type of mortgage rate you choose to go with, you’re still getting a great deal.
Our variable and fixed rates are so close that you have the luxury of deciding which you prefer. The difference between fixed and variable mortgage rates on LowestRates.ca is just a fraction of a percentage point. On a $400,000 mortgage with a 25-year amortization period and a down payment of 20%, this amounts to a difference of:
|Month||Our average variable rate||Our average fixed rate|
There is no one way to determine how big of a mortgage you can afford since everyone’s personal financial situation is unique. However, there are some guidelines Canadian lenders use when evaluating your eligibility for a mortgage.
Your down payment: How much you are able to put down up front will inevitably impact how big of a mortgage you can afford. This is because there are minimum requirements for a down payment in Canada depending on the cost of the home.
On a home that’s $500,000 or less, you’re required to put down at least 5% up front. On a home that’s between $500,000 and $1 million, you’re required to put down 5% of the first $500,000, and 10% of the rest of the principal. On a $1 million home, you’re required to put down at least 20%.
Gross Debt Service Ratio: Your GDS ratio refers to the amount of your monthly income you’ll spend on housing costs. The Financial Consumer Agency of Canada uses a standard GDS ratio of 39% as a guideline, though every lender will be a little different. The lower your GDS ratio, the larger the mortgage you may be approved for.
Total Debt Service Ratio: Your TDS ratio refers to the total portion of your income that goes to paying debts and obligations each month. The Canadian Mortgage and Housing Corporation advises maintaining a TDS ratio of less than 42%. Much like your GDS ratio, the lower your TDS ratio, the larger the mortgage you may be approved for.
The surest way to secure the best mortgage rate from lenders in your area is to compare the housing market. Most lenders won’t offer you their best rates up front, which means hours on the phone negotiating your contract for you. At LowestRates.ca, we collect the best rates from over 30 banks and brokers across the country and let them compete for your business. Get started by beginning a form with us.
There are generally two types of mortgage rates you can select from. The first and more common option among Canadians is the fixed mortgage rate, which is set at the beginning of the mortgage term and can’t be changed until the term ends and the contract is renewed. The second option is a variable mortgage rate, which fluctuates according to market conditions.
Open mortgages can be paid off at any time without penalty, while closed mortgages impose steep penalties if you pay your loan off before the end of your term. Closed mortgages tend to have lower interest rates than open mortgages.
In Canada, there are a number of different ways to structure your mortgages. A mortgage can vary depending on the term length, rate type and whether the mortgage is open or closed. Regardless of whether you have a fixed-closed, fixed-open, variable-closed or variable-open mortgage, term lengths can range from anywhere between one year and 10 years. The most common term length in Canada is five years.
Fixed-closed mortgage: A fixed-closed mortgage is a mortgage contract where the rate is fixed and the homeowners are not allowed to pay off their mortgage loan early without incurring a penalty.
Fixed-open mortgage: A fixed-open mortgage is a contract where the rate is fixed, but the homeowners are allowed to pay off their mortgage early without incurring a fee.
Variable-closed mortgage: A variable closed mortgage refers to a mortgage contract where the homeowners have a variable mortgage rate but can’t pay off their mortgage early without incurring a prepayment penalty. This type of mortgage rate fluctuates with market conditions.
Variable-open mortgage: Lastly, a variable open mortgage allows the homeowners to pay off their mortgage early without incurring a prepayment penalty. However, their rates will fluctuate with market conditions.
Securing a great mortgage rate is just the first of many things you’ll have to budget for as a homeowner. We’re pretty sure you knew this, but homeownership doesn’t come cheap. You’re in luck though, because we’re here to walk you through it from beginning to end. Here are some of the other things you’ll need to budget for as a prospective homeowner.
Land transfer fees: In every province except Alberta and Saskatchewan, you have to pay a land transfer tax once you close the sale on your new home. The exact calculation varies depending on which province you live in, but it’s a cost you’ll need to consider come closing time.
Property taxes: A property tax is an annual charge depending on where you live. If you live inside a municipality, you’ll be required to pay a municipal property tax. If you live outside a town or city, you’ll have to pay a provincial property tax. Property taxes can either be rolled into your mortgage or paid in installments depending on the lender you’re working with.
Home insurance: While home insurance isn’t a legal requirement in Canada, you’ll be hard pressed to find a lender to offer you a mortgage contract without it. Home insurance provides compensation in case your home is damaged by unexpected events, such as flooding or fire.
Land Transfer Taxes: These are additional taxes that are calculated as a percentage of the purchase price of the home. Land transfer taxes vary by province, though some municipalities charge an additional land transfer tax. Toronto, for example.
Renovations: Here’s one that could actually save you money, if done right. If you choose to renovate your home for accessibility reasons, you may be eligible for the Home Accessibility Credit (HATC), a federal tax credit. Some provinces also have their own accessibility credits. If you’re not diligent however — like if you hire a careless contractor for instance or try to complete a DIY project that you may not have the skills for — you could wind up costing yourself more money in the long run.
And one more thing: Check back here soon to read the 2020 First Time Homebuyers Guide, which will take you through all the extra costs you could incur while purchasing a home — and more.
The homebuyers guide walks you through the steps of buying a home from beginning to end; starting with mortgage and ending with closing costs and potential renovations.
In addition, the guide is updated annually and includes information about Canada’s current mortgage market.
Mortgage term: A mortgage term refers to the length of time your mortgage contract is in effect before it becomes eligible for renewal. Mortgage terms in Canada can range anywhere from one to 10 years, but the most common mortgage term is five years.
Amortization period: The amortization period is the amount of time it will take you to pay off your entire mortgage. In Canada, the maximum amortization period is 35 years. But, if your down payment was less than 20% and you were required to purchase mortgage insurance from the Canadian Mortgage Housing Corporation, then your maximum amortization period is 25 years.
The short answer is, yes. You can be pre-approved for a mortgage when a lender looks at your finances and informs you of the amount they will lend you and what interest rate they’re willing to offer you. Getting pre-approved for a mortgage can accelerate the process of moving into your new home when you find it. This is because if you’re pre-approved, the seller might choose your bid over another offer.
You’ll want to shop around for the best pre-approval rate you can find. While this can be a challenging and trying process, comparison sites like LowestRates.ca can make it a whole lot easier. Fill out our form to see what brokers are willing to offer you, and a broker will be in touch with you shortly to secure the rate you select on the site.
Payment flexibility needs to be negotiated with your lender at the outset. While some lenders will allow you to change the frequency and amount of your mortgage payments, others will charge fees for these adjustments.
This is why it’s important to think about prepayment privileges when you’re negotiating your mortgage contract. Otherwise, you might find yourself faced with additional fees if you’d like to make these changes down the line.
In addition, you’ll also likely be charged a fee if you choose to break your mortgage. This may happen if you choose to break your mortgage and renew your contract at a lower rate, or if you move before your mortgage has been paid. You can avoid paying a prepayment penalty by looking into securing portability as a feature of your mortgage contract early on.
Each mortgage lender sets rates based on their self-determined relationship to the prime lending rate. But, what’s the prime lending rate?
The prime lending rate is influenced by the Bank of Canada’s interest rate, which currently sits at 5.04%. Each bank has its own prime lending rate. The prime rate currently sits at 2.95%. Your lender will give you an annual interest rate on your mortgage that’s based on the prime rate. When the Bank of Canada raises its overnight rate, it gets more expensive for Canadian banks to borrow money. Therefore, they raise their own prime rates to cover the additional expense. Other kinds of loans that are affected by the prime rate include car loans, lines of credit and a handful of credit cards.
When you agree to a fixed-rate mortgage, you’ll select a rate based on what lenders are offering at the time and you’ll agree to pay that rate for the duration of your mortgage term. A variable rate, on the other hand, is usually determined by adding or subtracting a certain percentage from the prime lending rate. Each lender will determine this percentage on their own. when the prime lending rate goes up or down, the mortgage rates of homeowners who have variable mortgage rates will also go up or down.
There several different places Canadians can turn to get a mortgage. First, it’s important to identify the difference between a mortgage lender and a mortgage broker.
A mortgage lender lends money to the prospective homebuyers directly. They can include a wide range of companies, including banks, trust companies, loan companies, credit unions, caisses populaires and mortgage companies.
A mortgage broker, on the other hand, will not lend money directly to you. Mortgage brokers arrange your transaction by seeking out a lender for you.
While some lenders will only work directly with prospective homeowners, other mortgage products are only offered through mortgage brokers. Since mortgage brokers have access to several lenders at once, they might be able to provide you with a broader range of prospective offers.
LowestRates.ca compares banks, brokers and other lenders all at the same time so you don’t have to go through the trouble. And ultimately, we get you the best mortgage rate from one of our trusted partners. Fill out a form to get started.
Your credit score can range anywhere from 300 to 900 in Canada, and a credit score of 750 is considered excellent. In order to obtain a mortgage and buy a home, most lenders will require you to have a credit score at least within the 600-700 range. A higher score would net you a lower interest rate, however..
The mortgage stress test was first introduced by the federal government in 2017. The rules applied to both insured and uninsured mortgages. Initially, it required prospective homebuyers to qualify for a mortgage rate which is the higher of the following:
- The Bank of Canada five-year rate (currently 5.04%).
- The rate offered by your lender, plus 2%.
Starting in April 2020, homebuyers applying for insured mortgages (meaning their down payment was less than 20% of the value of the property), will only need to quality for the higher of the following:
- The weekly 5-year rate on all insured mortgages, plus 2%.
- The rate offered by your lender plus 2%.
If you’re planning to sell your house or break your mortgage before the end of your term, there could be fees to pay.
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