10 Tips for Getting the Best Mortgage Rate in Canada: Save Money on Your Home Loan
Are you in the process of buying a home in Canada and looking for ways to get the best mortgage rate possible? A lower mortgage rate can save you thousands of dollars in interest over the life of your loan and make your monthly payments more affordable. Here are 10 tips to help you secure the best mortgage rate in Canada:
1. To get the best mortgage rate in Canada, shop around and compare rates from multiple lenders.
One way to get the best mortgage rate in Canada is to use a mortgage broker. At Pekoe Mortgages, we are a leading mortgage broker in the country, with a team of experienced professionals who are dedicated to helping our clients get the best mortgage rate possible.
By working with us at Pekoe Mortgages, you can access a wide range of mortgage options from different lenders, making it easier to find the best rate for your needs. We will handle all of the paperwork and negotiations on your behalf, making the process of getting a mortgage as hassle-free as possible.
In addition to helping you find the best mortgage rate, we at Pekoe Mortgages also offer a range of other services, including mortgage refinancing, home equity loans, and mortgage protection insurance.
Overall, using a mortgage broker like Pekoe Mortgages can be a great way to get the best mortgage rate in Canada, as we have the knowledge and experience to help you find the best deal possible.
2. Focus on improving your credit score.
Tip 2 for getting the best mortgage rate in Canada is to focus on improving your credit score. Your credit score is a key factor that lenders consider when determining your mortgage rate. A higher credit score can lead to a lower mortgage rate, as it indicates to lenders that you are a low-risk borrower.
To improve your credit score, there are a few steps you can take:
Pay your bills on time: Late payments can have a negative impact on your credit score. Make sure to pay all of your bills, including credit card bills and loans, on time.
Reduce your debt: High levels of debt can also lower your credit score. Try to pay down your debts as much as possible, particularly high-interest credit card debts.
Avoid applying for new credit unnecessarily: Each time you apply for new credit, it can have a negative impact on your credit score. Only apply for credit when you really need it.
By taking these steps to improve your credit score, you can increase your chances of getting a lower mortgage rate and save money on your home loan.
3. Consider making a larger down payment.
Tip 3 for getting the best mortgage rate in Canada is to consider making a larger down payment. A larger down payment can reduce the amount you need to borrow, which can result in a lower mortgage rate.
For example, if you are buying a home for $400,000 and you make a down payment of $80,000 (20%), you will need to borrow $320,000. If you make a down payment of $100,000 (25%), you will only need to borrow $300,000. Because you are borrowing less money, you may be able to qualify for a lower mortgage rate.
In addition to potentially lowering your mortgage rate, a larger down payment can also help you avoid paying mortgage insurance. Most lenders require mortgage insurance if you put down less than 20% of the purchase price of your home. Mortgage insurance can add to your monthly payments, so making a larger down payment can help you save money in the long run.
To save for a larger down payment, try setting a budget and cutting back on unnecessary expenses. You may also be able to use the Home Buyers’ Plan to withdraw funds from your registered retirement savings plan (RRSP) for a down payment.
Overall, making a larger down payment can be a good way to get a lower mortgage rate and save money on your home loan.
4. Consider a shorter mortgage term.
Tip 4 for getting the best mortgage rate in Canada is to consider a shorter mortgage term. Mortgage rates tend to be lower for shorter terms, such as 15-year mortgages, compared to longer terms like 30-year mortgages. This is because lenders typically charge a lower interest rate for a shorter loan period, as there is less time for the lender to earn interest.
While the monthly payments for a shorter term mortgage may be higher, you’ll pay less in interest over the life of the loan. For example, if you have a $300,000 mortgage with a 4% interest rate and a 30-year term, your monthly payments will be $1,432 and you’ll pay a total of $514,737 in interest over the life of the loan. If you have the same mortgage with a 15-year term, your monthly payments will be $2,172, but you’ll only pay $207,220 in interest over the life of the loan.
While a shorter mortgage term may not be right for everyone, it can be a good option if you’re planning on staying in your home for a long time or if interest rates are expected to rise.
Overall, considering a shorter mortgage term can be a good way to get a lower mortgage rate and save money on your home loan.
5. To get the best mortgage rate in Canada, opt for a fixed-rate mortgage.
Tip 5 for getting the best mortgage rate in Canada is to consider a fixed-rate mortgage. A fixed-rate mortgage has a set interest rate that doesn’t change over the life of the loan, which can provide stability and predictability for your monthly payments.
For example, if you have a fixed-rate mortgage with a 4% interest rate, your monthly payments will remain the same for the entire term of the loan. This can make it easier to budget and plan for your financial future.
Fixed-rate mortgages can be a good option if you’re planning on staying in your home for a long time or if interest rates are expected to rise. With a fixed-rate mortgage, you won’t have to worry about your interest rate increasing and causing your monthly payments to go up.
On the other hand, if you expect to pay off your mortgage in a shorter time frame or if you’re comfortable with the risk, you may want to consider a variable-rate mortgage. Variable-rate mortgages have an interest rate that can fluctuate, which can result in lower initial rates but also carries the risk of higher rates in the future.
Overall, a fixed-rate mortgage can be a good option if you want stability and predictability for your monthly payments.
6. Consider opting for a variable-rate mortgage.
While fixed-rate mortgages have a set interest rate that doesn’t change over the life of the loan, variable-rate mortgages have an interest rate that can fluctuate.
The advantage of a variable-rate mortgage is that they may offer a lower initial rate than fixed-rate mortgages. For example, if you have a variable-rate mortgage with a 3% interest rate and interest rates rise, your monthly payments may increase. However, if interest rates fall, your monthly payments may decrease.
Variable-rate mortgages can be a good option if you expect to pay off your mortgage in a shorter time frame or if you’re comfortable with the risk. However, it’s important to note that variable-rate mortgages can be riskier than fixed-rate mortgages because the interest rate can fluctuate. If interest rates rise significantly, your monthly payments could become unaffordable.
Overall, a variable-rate mortgage can be a good option if you’re comfortable with the risk and are looking for a lower initial rate. However, it’s important to carefully consider the risks and benefits before deciding which type of mortgage is right for you.
7. Don't be afraid to negotiate with your lender.
It’s important to remember that mortgage rates are negotiable, so don’t be afraid to negotiate to get the best rate possible.
When negotiating with your lender, it’s a good idea to have a clear understanding of the mortgage rates and terms available from other lenders. This will give you a benchmark to use as you negotiate with your lender.
There are a few key points you can negotiate with your lender:
Interest rate: You can negotiate the interest rate on your mortgage to try to get a lower rate.
Closing costs and fees: These costs can add up, so it’s a good idea to negotiate to try to get them reduced or waived.
Prepayment options: You may be able to negotiate more flexible prepayment options, such as the ability to make larger prepayments or to break your mortgage early without penalty.
By negotiating with your lender, you may be able to secure a lower mortgage rate and save money on your home loan. It’s important to be prepared and to do your research before negotiating, as this can give you more leverage and increase your chances of getting the best deal possible.
8. Take advantage of government programs and incentives.
Tip 8 for getting the best mortgage rate in Canada is to consider government programs and incentives, such as the First-Time Home Buyer Incentive (FTHBI) and the Home Buyers’ Plan (HBP).
The FTHBI is a government program that offers shared equity mortgages to first-time home buyers. With the FTHBI, the government will contribute up to 10% of the purchase price of a home, which can help lower your mortgage payments. You can learn more about the FTHBI and see if you qualify at the Government of Canada’s website.
The HBP is another government program that allows you to withdraw funds from your registered retirement savings plan (RRSP) tax-free to use as a down payment on a home. The HBP can help you save for a down payment and potentially qualify for a lower mortgage rate. You can learn more about the HBP and see if you qualify at the Government of Canada’s website.
In addition to these programs, there are also a number of provincial and territorial programs that offer incentives for first-time home buyers, such as the BC Home Owner Mortgage and Equity Partnership (BC HOME Partnership) and the Ontario Land Transfer Tax Refund for First-Time Homebuyers.
By considering government programs and incentives, you may be able to get a lower mortgage rate or make homeownership more affordable. It’s a good idea to research the options available and see if you qualify for any programs that can help you get the best mortgage rate possible.
9. Opt for a mortgage with a portable feature.
A portable mortgage allows you to transfer your mortgage to a new property if you decide to move before the end of your mortgage term. This can be a convenient option if you’re not sure how long you’ll be staying in your current home.
By choosing a portable mortgage, you won’t have to go through the process of applying for a new mortgage and potentially paying a higher interest rate if you decide to move. Instead, you can transfer your mortgage to your new property and potentially save money on your home loan.
It’s important to note that not all mortgages are portable, so it’s a good idea to ask your lender about this option when shopping for a mortgage. Some lenders may charge a fee for porting your mortgage, so it’s important to consider this when deciding which mortgage is right for you.
Overall, a portable mortgage can be a good option if you’re not sure how long you’ll be staying in your current home and want to save money on your home loan.
10. Consider a mortgage with a longer amortization period.
Our final tip for getting the best mortgage rate in Canada is to consider a mortgage with a longer amortization period. The amortization period is the length of time it will take to pay off your mortgage in full.
Mortgage rates tend to be lower for longer amortization periods, such as 25 or 30 years. This is because lenders typically charge a lower interest rate for a longer loan period, as there is more time for the lender to earn interest.
While the monthly payments for a longer amortization period may be lower, you’ll pay more in interest over the life of the loan. For example, if you have a $300,000 mortgage with a 4% interest rate and a 25-year amortization period, your monthly payments will be $1,629 and you’ll pay a total of $412,084 in interest over the life of the loan. If you have the same mortgage with a 30-year amortization period, your monthly payments will be $1,432, but you’ll pay $514,737 in interest over the life of the loan.
While a longer amortization period may not be right for everyone, it can be a good option if you’re looking to lower your monthly payments or if you’re on a tight budget.
Overall, considering a mortgage with a longer amortization period can be a good way to get a lower mortgage rate and lower monthly payments. It’s important to carefully consider the trade-offs and choose the amortization period that’s right for you.
There are several steps you can take to get the best mortgage rate in Canada. By considering factors such as your credit score, down payment size, mortgage term, and type of mortgage, you can increase your chances of getting a lower mortgage rate and save money on your home loan.
Government programs and incentives, portable mortgages, and longer amortization periods can also help lower your mortgage rate.
If you’re looking for help getting the best mortgage rate, don’t hesitate to contact us at Pekoe Mortgages. We can guide you through the mortgage process and help you find a rate that works for you. Get in touch today to learn more.
