Buying a home in Toronto is all about making the right decision at the right time. And this involves putting your best foot forward from a financial standpoint. Because outright home purchases are expensive, you have to consider signing up for one of the many mortgage products out there. However, before you secure your mortgage, you must do everything within your control to ensure you pay as low a mortgage rate as you can over the life of your loan. Below are 10 ways to get the best mortgage rates in Toronto.
Do your research
Surf online and you’d see many online platforms that enable you to compare rates across many lenders in Canada. These websites not only tell you which bank has the best mortgage rates, but they also provide you with a mortgage calculator to calculate your monthly payments. Some of the top rate-comparison sites are:
Rate-comparison sites give you the advantage of having a fair idea of what the market is offering before consulting your bank or a mortgage professional. However, it is pertinent to understand some rates you come across might be difficult to qualify for due to stringent pre-qualification conditions.
A long employment history
A long employment history goes a long way to instill confidence in the lender. It shows that you will be able to pay your monthly rates when you secure your mortgage. It gets better when your work history shows you’ve been at the same place for a long period as the lender is more inclined to offer you a mortgage with low rates. If you change jobs frequently, the lender might be reluctant to give you a loan. Changing jobs often will negatively affect your chances of securing the best mortgage rates in Toronto.
Keep a Good Credit Score
A good credit score is a linchpin of securing the best mortgage rates anywhere. Canada has cautious lenders who will critically look at your credit score to determine your creditworthiness. A high score assures the lender you can repay your mortgage while a low score may push the lender into charging you a higher rate or rejecting your application in its entirety.
Your Down Payment
Your down payment determines how much interest you’d have to pay on your loan. Applying for a small loan less than C$100,000 will push the lender into charging you a high interest rate for the loan to be profitable. Conversely, home loans above C$400,000 are tagged ‘jumbo loans’, and because they have a higher risk, the lender charges a higher mortgage rate. To scale through this hurdle, you’d have to find a middle ground, not borrowing too little or accepting too much. However, it is well known the more money you put up as your down payment, the better your mortgage rates.
Apply For Shorter Loans
Another method to lower your rates is to apply for shorter loans. Rather than the 25-year mortgage, you can take a shorter term. Lenders offer lower rates to borrowers who go for 10 to 15-year loans, which almost guarantees a reduction in the overall cost of your mortgage debt. Another way is to go for the variable rate. Borrowers who opt for the variable rate get to pay lesser rates for five years and this is an option worth considering if you can quickly pay off your loan.
Buy Discount Points
Discount points may seem like a harebrained idea, but they are handy in the long-term. Discount points are fees you pay at the initial term and which give you the option of having a lower interest rate. Each discount point you purchase can reduce the interest rate on your loan by 0.125%. However, you should only pay for discount points if you intend to live in your property for a long time.
You can set automatic payments on your mortgage to ensure you are never late on your payments. Lenders typically offer lower rates to borrowers who set up automatic payments and you should inquire from your bank if they offer this option. However, the lender can remove your discount once you shut down your bank account, disable the automatic payments, or change banks.
Refinancing is an option for Canadians who cannot cope with their high mortgage rates. Major lenders in Canada offer refinancing options that can save you thousands of dollars in the long run. Nonetheless, you should be prepared to incur cost and pay fees which will be added to your existing loan thus increasing the total amount.
Mortgage Rate Lock
Mortgage rates are in a constant state of flux and you may be ready to complete the purchase of your property only to find the rate has gone up.
If you’re comfortable with the mortgage rate offered by your lender, you have the option of locking the rate for a limited time. A mortgage rate lock is a guarantee by the lender to keep a specific rate for a limited time. That way, you can close on your home without worrying about a sudden increase in your rates. It is possible to find rate locks that last for a month or two. However, you may have to pay extra to extend the time if you’re not able to close within the lock period.