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Getting the best mortgage rates in Canada is on every homebuyer’s mind. A lower interest rate can save you thousands of dollars over your mortgage term, so getting anything less the best current mortgage rates in Canada could cost you a significant amount.
Most Canadians don’t shop for mortgages before signing up with the bank they’ve been with since childhood. They don’t know the average mortgage rates in Canada, and end up paying a lot more on their mortgage for no reason.
Your first instinct may be to think that the bank will give you the best mortgage rates, but that’s actually not the case. Banks have higher interest rates when you go to them directly because they know that most people have no idea what a “good” mortgage rate is.
The only way to find the best mortgage rates in Canada is to compare mortgage rates. This lets you find not only the lowest mortgage rates, but also the current Canadian mortgage rates. When you know what the “normal” mortgage rate is, you can tell how good of a deal you’re getting on your mortgage.
People getting their first mortgage might understandably not know much about different mortgage types, if anything at all. It can be surprising to learn that many different types of mortgages exist, and some are better than others for certain circumstances.
For example, a closed mortgage has penalties if you break it early, such as when you have to move before your mortgage term is over. An open mortgage doesn’t have any penalties, but comes at a much higher interest rate, so it’s not worth it unless you plan on paying off the mortgage in full very quickly.
When choosing the best mortgage rates in Canada, there’s more than just the interest rate to consider. You also have to think about the term length, penalties, and rate type before choosing a mortgage.
One of the biggest things you have to consider when getting a mortgage is whether you want a fixed or variable rate mortgage.
Fixed rates have the same interest rate for the length of the term. Payments will always be the same month-to-month, and it doesn’t matter what happens to Canadian interest rates. Fixed rates have been the more popular choice for homebuyers for a long time because of their perceived stability.
Variable rates are normally cheaper than fixed rates, but have the potential to go up or down during your term. A common misconception about variable rates is that the payment will go up or down whenever interest rates do, but that’s not true. In fact, payments will stay the same throughout the term – the only thing that changes is the amount of money going towards the principal and interest. When interest rates go down, you pay less in interest, and more in interest when rates go up.
Fixed rates also have higher mortgage penalties than variable rates, so that’s something to think about as well.
Historically, variable rates end up cheaper in the long run, but currently fixed rates are actually cheaper than comparable variable terms. Which is best for you depends on your situation, so we recommend speaking to an expert mortgage broker.
As said earlier, closed mortgages have penalties for when you pay it off in full before the term is over. However, most mortgages let you pay a small amount above your mortgage payment every month or once a year. These are known as pre-payment privileges.
The absolute lowest mortgage rates in Canada may not allow you any pre-payment privileges, so it’s best to learn as much as you can about your mortgage before you sign. The rate on these mortgages may be a little bit lower, but you could end up missing out on the benefits of your pre-payments.
Normal pre-payment privileges are 20/20, meaning that you can pay up to 20% more than your monthly mortgage payment per month, or up to 20% of the total mortgage amount once per year. This will substantially lower your mortgage amount and interest owed, as well as shave years off the total length of your mortgage.
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