Stop looking at all the different websites to find the best mortgage rates in Canada! Here’s the real secret to finding the best deal:
When you’re searching for the best mortgage rates in Canada, you’ll find big differences depending on what type of borrower you are. The bank will either see you as a “perfect customer” and want to keep you by offering the best mortgage rate they can because they think there’s a really good chance you’ll pay them back. Or, they may see you as a “not-so-perfect customer” and need to charge a higher mortgage rate because they feel they’re taking a bigger risk lending you money.
The formulas used to calculate the best mortgage rates are virtually the same for all lenders across Canada. They use your current financial situation and past repayment history to try and predict their future profits.
For example, if you have a excellent credit report, have had a large and steady income for a few years, and you have a big down payment, the risk to the lender is potentially very low.
Your excellent credit report shows that in the past you’ve borrowed money and paid it back on time. If you do that long enough your credit score will increase. The lender views your proven history of repaying loans as a good sign that you can be trusted to repay their money.
If you’ve been fortunate enough to have a large income for the past few years there’s a good chance you will keep earning enough to repay the loan. Obviously, this is relative to to the size of your mortgage. The lenders want to feel comfortable that you have enough money to live your life and repay the loan.
And, if you have a large down payment, the lender knows you likely won’t stop making payments because you have a lot to lose. If you stop making payments the lender will foreclose on you to legally gain control of the property so it can be sold and they can get their money back. If you had a large down payment they know there’s enough equity to recover their losses.
So, the bank sees anything less than the “perfect customer” as a risk, and increases their best mortgage rates to offset that risk.
Now, do only the “perfect customers” get the best mortgage rates in Canada? If you don’t have a perfect credit report, the big income, or a huge down payment. What do you do?
To get the same best mortgage rates the “perfect customers” do you need to shop around. But… you need to do it a certain way.
Often the “perfect customers” are well educated in their financial dealings. They know their net worth, their assets & liabilities, and their credit score. And, they know what the best mortgage rates shoud be. They confidently shop around at different lenders because they know everyone desperately wants their business.
For everyone else, this is not the way to do it. Each time you go to a lender and fill out a loan application form they do a check to find your credit score. Most people don’t know this, but if you fill out multiple application forms and a credit check is done each time, your credit score can actually go down. Potential lenders also see the other credit checks, and may wonder why you’ve come to them. Why has every other lender turned you down? Are you a risk? Even if they borrow you money, they probably won’t want to give you the best mortgage rate.
Your best bet is to use a Canadian mortgage broker. You discuss your financial situation with them, fill out one application form, and they do one credit check. The mortgage broker takes your information and matches it with a lender that’s best for your situation, and gets you the best mortgage rates in Canada.
In fact, mortgage brokers can often get better mortgage rates than the bank branches offer their own clients. It could even be at a bank you’re already dealing with.
This happens because the banks pay the mortgage brokers a fee if they send you as a customer. It’s a win for the bank because they didn’t have to pay any marketing or administration fees to find you as a customer. And it’s a win for you because there’s a huge incentive for the broker to find you the best mortgage rates in Canada. If the broker doesn’t deliver, he doesn’t get paid.
As an average consumer, this is the best you can do to get the best mortgage rates in Canada:
So that’s it! That’s the secret to finding the best mortgage rates in Canada.