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Written By
Corinna Frattini
Mar 13, 2023
•Housing
When searching for your first home, here are five tips to ensure you get the best mortgage rates in Canada. And, to get the best rates will require you to research so you know how to select a mortgage that’s right for you. Many newcomers arrive with savings to own a home and establish roots in Canada. And getting the best mortgage rate can save you thousands of dollars over the course of your mortgage.
Buying your first home in Canada is an exciting time to make your dream of homeownership a reality. But at the same time, it can create stress and confusion. You may have questions about the real estate process in Canada, the lending process, or other important questions. And, buying a home is likely the largest and most important decision that you will make. So, it’s important to understand what’s involved, and how you can save thousands of dollars with the best mortgage rate.
A home purchase is a major investment. So, research the housing market in Canada and the lending and real estate process. Do your research so that you’re confident with the decisions you’ll have to make every step of the way. And, this includes understanding the different types of mortgages:
Your down payment is money you pay towards your home purchase. It is deducted from the purchase price of your home. And, the remaining amount will be covered by your mortgage loan.
A 2019 survey conducted by Royal LePage revealed that 75% of newcomers arrive in Canada with savings to purchase a home. And the great news is that those savings can help you to get the best mortgage rate.
You can get a conventional mortgage loan if you can pay 20% or more of the property value. But, with less than 20% of your down payment, you’ll get a high-ratio mortgage. And, high-ratio mortgages require home buyers to purchase mortgage default insurance.
This mortgage insurance allows homebuyers to buy a home with less than a 20% down payment of the purchase price. However, mortgage insurance only protects your lender. Therefore, it’s important to understand the terms and conditions of mortgage insurance if you’re unable to pay your mortgage.
Homebuyers require a minimum down payment of 5% of the home purchase price. So, if you have less than 5%, keep saving!
When you have a bigger down payment it can save you money over the lifetime of your mortgage. But, if you have less than 20% of the purchase price, your lender will require you to pay for mortgage insurance.
There’s nothing like a poor credit score to stand in the way of getting the best mortgage rates in Canada. The minimum required credit score to get a mortgage in Canada is between 620 – 679. But, with a good credit score (usually between 680 – 724 points), you may get better borrowing rates.
Although, even with a good credit score, it’s smart to practice good financial habits to increase your ability to borrow money. For example:
If you’re a first-time homebuyer, working with a mortgage broker can help you navigate the complexity of mortgage products, options, and features. A mortgage broker can access a broad range of financing options.
Buying your first home in Canada can come with uncertainty about unexpected costs, affordability, or paying too much for your home. And, you’ll likely have questions that a mortgage broker can answer.
A professional mortgage broker can inform you about mortgage options and features. Because different mortgage options may be more suitable for you based on your needs and plans. For example, you will need this information to help you make decisions related to:
In addition to knowledge and experience, mortgage brokers can:
Lenders may have important restrictions related to each mortgage option which can cost you more money. Working with a mortgage broker can save you thousands of dollars in costs.
When searching for your new home, it’s difficult to predict if mortgage rates will increase or decrease. So, a pre-approved mortgage can protect you against interest rate hikes while you search. With a pre-approved mortgage, you can lock in a mortgage rate for up to 120 days. In addition, getting pre-approved will help you understand how much you can afford to buy your first house in Canada.
You can get a mortgage from your bank or a mortgage broker. However, working with a broker who is a subject matter expert with specialized mortgage knowledge can offer several advantages. For example, you can:
A broker works with several lenders including top banks, credit unions, and other lenders to get you a more flexible deal. And with one single mortgage application, they get several lenders to “bid” for your business to get you the best possible rate.
In addition, a mortgage broker acts as a single point of contact who can manage everything from applying for the mortgage to negotiating your rate and disbursing the funds. All of this can create a stress-free experience, especially if you’re unfamiliar with the process.
Establishing roots in Canada through home ownership is exciting! Achieve your dream with the best mortgage rate to save you thousands of dollars for your mortgage.
WRITTEN BY
Corinna Frattini
Senior Editor, Prepare for Canada
Corinna Frattini is the Senior Editor and Content Director for Prepare for Canada. She contributes articles to help newcomers achieve their goals in key areas related to living, working, and settling in Canada. With an extensive background in human resources and leadership development, her articles focus on what Canadian employers seek and how newcomers can continue their careers in Canada.
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