Do You Make These Mortgage Mistakes?

mortgage rates canada

With all the possibilities and choices available for mortgages and borrowing today, you should never feel like your gambling.

So how do you determine what the best kind of rate is for your family and why? And are you really getting the best interest rate, or is there better available?

How to Get the Best Possible Mortgage Rate

When you are looking for the best rate, ensure that you SHOP AROUND:

  • Remember that posted bank rates are often not the lowest out there.
  • Consider going beyond your financial institution and talk to an independent mortgage brokerage firm. They will often be able to not only match the posted rate, but be able to offer you a lower rate, thanks to their accessibility to various lenders.
  • Don’t forget that with the competition out there to be your lender, you are essentially in the driver’s seat for negotiating a better rate.
  • Although banks don’t have as much wiggle room for rate adjustments, brokers do, and they will often do the negotiating for you.
  • Don’t forget to try to negotiate for your lender to pay for some of your fees, such as closing costs or legal fees, if you are bringing your business to them. It’s all a part of the negotiation game.

Canadians have more options but still aren’t taking advantage of them

In the not so distant past, we went to our banks for all our borrowing and mortgage needs. But times have changed, and there are many more options. Still, the facts don’t lie – over 1/2 of Canadians don’t shop around for their mortgage.

By all means, visit your local bank or banks, even if you don’t have your accounts with them. Find out what they have to offer you in terms of rates and any extras, like paying for fees or even paying for a moving truck! It’s all negotiable.

Come prepared. That means, bring your credit info, including your assets vs debts, your credit scores and any other outstanding loans that you may have. This knowledge will help your lender make a preliminary determination about your rates and the amount you can borrow before they start punching numbers.

Some context – how do banks set their five-year rates?

What is a fixed and a variable rate, how and why do these rates fluctuate, and how do the banks set these rates?

  • A variable rate will change as the index of which your loan is based changes – often this index is called a prime rate.
  • Depending on the terms of your loan, this variable rate can change several times monthly.
  • A fixed interest rate means that the interest rate will not change, no matter what happens in the market, during the term of your loan. Your payments remain the same.

Essentially, Canadian banks set their rates based on their borrowing cost, and the daily fluctuations of various stocks and bonds. If you choose a fixed rate, the bank is guaranteeing you that rate, usually for a term of 5 years, and they will deal with the daily fluctuations in the money market.

If you choose a variable rate, it can be riskier, but often offers a much lower rate. As mentioned before, variable rates are usually based on “prime” and as the economy fluctuates, so does prime, and, in turn, your mortgage rate.

The difference can often be up to a 3% difference, which, in the case of a large borrowed amount, can mean thousands of dollars in interest spent or saved.

  • If you feel comfortable with a rate that can fluctuate over your term, then a variable rate is right for you.
  • If you’re more of a safety-seeker and want your rate guaranteed, despite the market, then you’re better to go for a fixed rate.

A quick checklist – 5 things to know before renewing your mortgage

1. The posted rate isn’t always the best rate

This falls under the category of “make sure you negotiate”. The posted rate should be a starting point for you, and you can go for a better rate from there. Educate yourself and shop around and see who is willing to go the extra mile for you and to save you the most money in the long run.

2. Shop around before you negotiate:

Don’t walk into a bank and try to negotiate a rate unarmed. You need to know what other institutions are offering, as well as the perks involved. You can find other rates on-line or by calling around. Lenders want you to borrow from them, and to make it worth your while, they will come down.

3. Bank or broker?

Brokers can usually offer a better rate than banks due to the variety of lenders that they can access. Nevertheless, your bank may offer other perks that might offset the low rate that you might get from a broker. Also, be wary of brokers that are brand new or have no tenacity in the industry. You want to ensure a trusting relationship.

4. Loyalty can hurt you

Keep in mind that loyalty to your financial institution will not guarantee you the best rate when you’re up for renewal. Loyalty doesn’t always count when it’s time to renew your mortgage. So, once again, shop around and negotiate the best rate.

5. Check the terms before you sign

As in any business transaction, always read the small print before you sign. Make sure the rate you choose offers other options that might be useful to you in the future, such as the ability to put in an extra payment, the option to skip a payment if times are tough, and the stipulations around penalties if you need to get out of the mortgage.


Ensure that you know where you stand financially, that you have a clear understanding of what you’d like from your money, and that you have the ability to negotiate the best rate for you.

Money lending is a business, and like every other business, the lenders want your patronage. They need you as a customer. It’s not a bad thing to make them work for your business!

Maybe it’s a Canadian thing…are we too polite to leave our traditional lender? Or too conservative to shop around?

So, why do you or don’t you shop around for your mortgage?

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