20 Questions to Answer to Get Your Best Mortgage Rate
Factors such as good credit scores, purchase price and amortization lengths are more important nowadays with the new mortgage rules. “What’s your best mortgage rate?” is not a straightforward question anymore. The following questions will help determine what kind of rate you will qualify for.
1) What’s the term?
Mortgage length (“term”) and rate type (fixed or variable) will affect your rate.
2) Is the mortgage for your primary residence, a second home or a rental you won’t live in?
If you rent out the property and don’t live there be prepared to pay more than if it were your primary residence.
3) Can you adequately prove your income?
If you can’t, expect higher rates.
4) Where is the property located?
City and province matters.
5) When is the closing date?
The longer you want your rate guaranteed the more you’ll pay.
6) Can you live with prepayment restrictions?
Some of the lowest rates currently allows no prepayments at all.
7) Can you live with portability headaches?
If you move to a new home, certain discount lenders will force you to close your old property and new property on the same day or pay a penalty.
8) Can you live with refinance restrictions?
Some lenders will charge you more than their lowest rate to have the freedom to refinance early.
9) Can you live with a large penalty?
¾ of the fixed mortgages sold in Canada do not have “fair” penalties. Be prepared to pay to break the contract early.
10) What type of property is it?
Some lenders will charge more for high-rise condos.
11) Do you want good rates when you renew and/or if you refinance early?
You will pay more than the cheapest market rate if you want a highly competitive lender AFTER you close.
12) Do you have any credit flaws like bankruptcy, consumer proposal or unpaid debts?
If you do, some lenders will not even bother. The ones who will, are likely to charge you way more than the lowest rate on the market.
13) Do you have a property address already or is it a pre-approval?
It is hard to get the best rate on a pre-approval.
14) How big is the mortgage, as a percentage of your home value?
“Loan-to-Value” (LTV) is the second-most-important factor in determining the rate you will pay.
15) Can you pass the government’s “stress test”?
If you have less than 20% equity you will most likely be getting an insured mortgage. You will need to prove that you can afford a payment at the Bank of Canada’s five-year “benchmark” rate. The rate is about 2% higher than your “contract rate”.
16) What is your credit score?
If your credit score is less than 680 you will end up with a higher rate.
17) Are you purchasing, refinancing or merely switching lenders?
A refinance costs more than the lowest market rate on a purchase.
18) What is/was the property’s purchase price?
If your property value is more than $1-million, be prepared to get charged more.
19) Is your mortgage already insured?
If it is and you are switching lenders with no changes to the mortgage you will save!
20) How long of an amortization do you require?
Some lenders are now charging extra for amortizations over 25 years.
If you need help getting the best rate, do not hesitate to contact me at anytime. My services are free of charge to you. I will negotiate on your behalf and ensure that you're getting the best rates and terms.