Mortgage rates compared in Canada

Canadian mortgage rates are constantly changing, with new offers emerging daily. To find the lowest mortgage rates for insured and uninsured loans, it is essential to compare rates from various lenders. According to the report, the lowest insured mortgage rates and lowest uninsured mortgage rates are available for comparison.

Mortgage Insurance Requirements

For borrowers seeking the best mortgage rates, understanding the requirements for default insurance is important. Mortgage insurance acts as a safety net for lenders, reducing the risk and cost of loans. Most new mortgages with less than a 20% down payment require default insurance by law.

Insured mortgages can offer lower rates, with lender-paid insured mortgages being the next best option for lower rates. These mortgages apply to conventional mortgages with at least 20% equity, an amortization of 25 years or less, and an owner-occupied home purchased for less than $1 million.

To qualify for the best prime mortgage rates, borrowers typically need:

• A 720-plus credit score. Some lenders allow lower scores — or require higher scores — but this is a good rule of thumb
• No derogatories on their credit report in the last few years, such as missed payments
• Monthly housing costs that are less than 39% of their gross monthly income
• A total monthly debt load that is no more than 44% of their gross monthly income
• Provable income, such as a job letter and pay stub, and/or tax documentation from the past two years if self-employed, or if using bonus, contract, commission or part-time income
• A closing date within the lender’s rate hold period
• A marketable home

Quick tip: Federally-regulated lenders must calculate your debt ratios using a stress test rate, which is 200 bps above your actual contract rate, or 5.25%, whichever is higher. This hurdle often makes it harder to qualify for some terms than others. For folks with high debt-to-income ratios, the stress test often dictates what rate and term they’ll get approved for. Update: Effective Nov. 21, 2024, the government’s stress test no longer applies when borrowers switch lenders, regardless of whether they have an insured or uninsured mortgage. This loophole requires that the mortgage amount and amortization remain the same.

Non-prime borrowers, including those with poor credit or high debt-to-income ratios, may face rate surcharges to offset extra risk. Lenders also apply surcharges in cases such as:

• Amortizations over 25 years (if uninsured): add 10 bps
• Amortizations over 30 years (if uninsured): add 100 bps or more, plus lender fees
• Non-owner-occupied rental properties: add 10-25 bps

Pre-approvals often cost more, as most do not close, leaving lenders with hedging costs and no revenue.

Negotiating Best Rates

Borrowers can follow these steps to negotiate the best mortgage rates:

• Use the criteria above to confirm if you’re a prime borrower who qualifies for the best rates
• Determine the best mortgage term for your needs. Get professional advice if you aren’t sure
• Confirm the type of mortgage you need: A) default-insured; B) insurable; or C) uninsurable
• Shortlist a few rates that look promising and call the provider directly for the pros and cons
• Call an experienced high-volume broker to get their take on the rates you’ve found
• See if they can offer better
• If you’re renewing your mortgage and don’t mind your current lender, ask it to beat the rates you found elsewhere

Information is power, so it often pays to call one or two brokers for a second opinion, even if you plan to stay with your existing lender.

When evaluating mortgage options, borrowers should consider factors such as rate guarantees, approval times, and documentation requirements. They should also ask about prepayment penalties, early prepayment penalties, and compounding interest.

Saving with Rate Switch

A borrower who switches lenders at maturity and doesn’t increase their borrowing or amortization may be able to keep their insurance in force, qualifying them for lower rates.

A 10 basis point rate savings keeps over $470 in your pocket over five years, for every $100,000 borrowed with a 25-year amortization.