Find the Best Mortgage Rates in Canada in 2021

Planning to buy a house and need to know about the best mortgage rates available? You have landed at the right place. House is often considered to be the most important investment of life, you need to be careful with your decision. Because whatever plan you choose to go with, will have a long-term effect on your life.

Not everyone can afford a financial advisor so it’s necessary you know the ins and outs of mortgage rates. In this article, I will walk you through the basic idea of a mortgage and how you can select the best for yourself.

How Does a Mortgage Work?

Let’s start with the primary concept of a mortgage. A mortgage is a loan given by banks or mortgage brokers to people who want to buy a property. Also, the borrower can take a mortgage on an existing property, which is known as a reverse mortgage.

#Step-1

You take the first step towards mortgage with the down payment of the property. If you are planning to buy a house for $500,000, you should pay around 20% of the amount in downpayment. Once paid, you can then apply for a 400,000 mortgage from any lender. But down payment can go as low as 5% in some cases.

#Step-2

Now comes the second step, how to qualify for a loan. Though we’ll stress on this matter in the next point, here is a brief idea. Before lending you a certain amount of money, the lender needs to be assured that you are able to pay that sum off. It requires your income statements and general financial records. Based on the assessment, the lender will give you a credit score to help you further acquiring a loan. In Canada, a credit score is anywhere from 300–900.

To explain it simply, if your credit score is more than 680, you’ll get low interest rates. On the other hand, if your credit score is less than 600, it’ll be tough to come across a beneficial mortgage.

#Step-3

Here come the necessary terms and agreements to set a mortgage. After you are qualified for a mortgage, it’s now time to talk about heavy words like amortization period, mortgage term, etc.

Amortization period is, in simple words, your loan period. You have to pay off the borrowed amount with interest by a certain period. The average amortization period in Canada is 25 years however, you can opt for any length of time between 5 to 35 years. Based on the amortization period, your instalment amount is calculated.

You should be aware of the fact that going with a longer amortization period means less monthly payments (or whatever payment interval) but more interest and vice versa.

A mortgage term, on the other hand, stands to make sure about the loan agreement. A loan agreement determines all the essential aspects of a post-mortgage situation. But this isn’t the same as the amortization period. Under the mortgage term, no loan agreements can’t be overruled. For example, if a borrower wishes to remortgage, renegotiate or even change the lender, he/she has to wait until the mortgage term is finished. Generally, a mortgage term holds for 6 months to 5 years.

These are the basics of a mortgage. There are some other things like fixed and variable mortgage rates, but we’ll look at them in the coming points.

How to Get Pre-Approved for a Mortgage?

Getting pre-approved for a mortgage is a wise thing to do though it doesn’t ensure the mortgage. It is more like appearing for a practice test before the real test. It doesn’t ensure success but you can assess your place.

So what do you need to get pre-approved for a mortgage? Well, nothing much. You have to contact a lender and bring some documents to them. They will examine everything and make an estimate of your capability. You’ll have a certification from a lender, which you may present as a supporting document while pleading for a mortgage.

The Documents are as follows-

Government ID

Income proof (Tax papers preferably)

Credit Card and Bank Statements

Asset Proofs

Previous or existing Loans, Mortgages, Debt, Down Payment or anything regarding financial records.

These are the necessary documents but some lenders might ask for something specific. Also, I would recommend you visit more than one lender, it brings more clarity. (Free tip- visit the rivals for better rates.)

How to Get the Best Mortgage Rates in Canada

If you already don’t know this, the best mortgage rate is defined by the lowest interest (and some other things). If you are going to buy a house then look for the mortgage that comes with the least interest. The current economy is fluctuating because of the Pandemic and the fear of a second wave might take us down a dark path. As a result, lenders are offering low interest in some states currently.

The picture gives a slight sense of the best mortgage rates here. These are the best lenders to go for fixed or variable mortgages according to Ratespy.com. The term held until means there will be no major changes in the mortgage until Nov 29. A mortgage rate hold generally stays for 60–90 days but it can sometimes be 120 days.

Prepayment is an option for you to make lump-sum payments before the mortgage is paid off. It helps to pay off the mortgage faster by making these additional payments. So if a mortgage allows 15% or 20% yearly prepayments that means you can pay off that much of your principal amount. For example, if you have a $500,000 mortgage, you can pay $75000 (15% prepayment) additional amount each year to complete before the time. However, if you want to make more prepayment then there is a small amount of charge to be paid.

For a broader understanding of the best mortgage rates in Canada, check this one by superbrokers.ca. It includes the list of best lenders.

Also, if you want location-based best mortgage interests in Canada, you can visit ratesupermarket.ca. The interest rates differ from place to place. You can’t find the mortgage rate in Halifax what you’d find in Ontario. Simply because the latter is a populated trade center with more businesses.

Here are some popular mortgage rates in Ontario.

Frequently Asked Questions about Mortgage Rates

What are the current Mortgage Rates in Canada?

The current mortgage rates depend on some parameters but to simplify anything around 1.63–1.76% interest for a 5-year fixed mortgage is great. Whereas a 3-year mortgage comes with the best interest under the 1.77%-1.99% range.

What is the difference between a fixed vs variable mortgage?

A fixed mortgage demands a fixed payment throughout the amortization period. It is a reliable and predictable way to go.

Variable mortgage depends on the value of the Prime rate. If the value flickers, your rate goes up or down. Sometimes it saves you money but it can also cost you more money than a fixed mortgage if the prime rate increases.

How to calculate mortgage payments?

Calculating mortgage payments is no big deal. Head over to Google Mortgage (Home Loan) Calculator and put the amounts correctly. If you are calculating your monthly payment amount, fill the loan amount, loan term, and interest. Easy!

If you want something more in detail, mortgagecalculator.org should be your choice.

What is a reverse mortgage?

It is the opposite of a normal mortgage as the name suggests. If you already own a house and wish to borrow money on account of the house then it’s called a reverse mortgage. Monthly payments are not necessary here.

What is mortgage insurance?

Mortgage insurance favors the lender to secure the risk of defaulting. If you borrow a large amount from a lender, it’s likely that you have to pay for the insurance premium.

Where can I get a mortgage?

Banks and mortgage brokers are responsible for mortgages. If you qualify for a mortgage, you have to contact one of these lenders in your area.