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We provide the most competitive mortgage rates from banks, brokers, and lenders in Canada. When you are in the market for a Canadian mortgage, you have several mortgage rate options to consider. Although final mortgage rates are based on your credit history, there are different rate structures that offer distinct benefits for specific needs. This guide will help you understand each of the rate types better so that you can make the rate choice that is right for you. Use our Canadian mortgage rate chart to quickly find the current mortgage rates in your area.
Open Rates vs. Closed Rates
Under Canadian law, an open mortgage is one in which you have no prepayment penalty. Open mortgages are limited to terms of five years or less, and their interest rates tend to be a bit higher than rates for closed mortgages because there is more uncertainty as to how much the lender’s final profit will be on the loan. Closed mortgages, on the other hand, are mortgages that have a prepayment penalty. If you pay off your loan before the amortization period ends, there are added fees to compensate the lender for its loss of interest income from your mortgage. Lenders’ income from closed mortgages is more predictable because it is less likely that borrowers will pay off their loans early. Thus, lenders generally charge lower interest rates for closed mortgages than they do on open mortgages. You can also get an open mortgage for a term of more than five years.
Whether an open or closed mortgage is right for you depends on your circumstances. Individuals who are convinced that they can pay off their mortgage in less than five years should definitely opt for the open mortgage because they will save tens of thousands of dollars in interest over the life of the loan. Those who will need a longer period in which to pay off their loan will want a closed mortgage. In this case, the lower interest rate benefits you in the long run. Furthermore, if your financial situation improves to the point where you can pay off your loan early, many closed mortgage lenders will allow you to make limited prepayments of as much as 20 percent of the principal a year. This allows you to take advantage of the low closed mortgage interest rate and still pay off your mortgage in less time.
Fixed Rates vs. Variable Rates
Most home buyers also have the option to choose between fixed mortgage rates and variable rate mortgages. Variable rate mortgages get their name from the fact that their rate may change over time. When the Bank of Canada adjusts the prime interest rate, the interest rate on a variable mortgage may go up or down. Payment amounts may change periodically, according to a schedule established when you sign for the loan. A fixed mortgage rate, on the other hand, remains the same for the life of the loan. You never have to worry about your payment changing, which makes it easier for you to budget your finances.
So, which of these rates are best for you? Again, it depends on your circumstances. If you anticipate selling in a few years, a variable rate mortgage can be the right option because you will get out of the loan before the rate changes. Since variable rates are usually lower than fixed rates, this also means that your payments will be lower. However, variable Canadian mortgage rates can increase and cause your monthly payment to go up along with them. If you cannot handle a higher mortgage payment and do not anticipate selling anytime soon, a fixed mortgage rate is probably better. While it will be a little higher than a variable rate mortgage, a fixed mortgage rate will never increase.
Bank Rates vs. Broker Rates
Once you have decided on the basic kind of mortgage rate structure that you want, it is time to find a lender who will offer you the best mortgage rates. At this point, you will have to decide whether you will go to a bank directly or consult a broker. Banks will offer you their set mortgage rates, which differ from institution to institution. However, when it comes to mortgage rates Canada brokers will shop your loan around to several different institutions in order to get the best deal for you.
Those who go with a mortgage broker tend to get the best rates, but regardless of the avenue you choose, it is essential that you compare the rates offered by several different lenders. We make it easy for you to do just that. Our extensive listing of banks and comparable rates allows you to find the best interest rate for your loan and save as much money as possible in the process.
Other Mortgage Options
There are also other mortgage rate options available whether or not you already own a home or want to borrow against your home equity and get the best mortgage rates. With an all-in-one mortgage, you can save a lot of money in interest. This option combines your mortgage loan, checking account and savings account. You make deposits and withdrawals from this account just as you would a normal checking or savings account, but the change is reflected in the loan balance. Deposits lower your principal balance, which lowers the amount of interest that accumulates each month. Withdrawals have the opposite effect. This mortgage can be a great way to pay down your loan more quickly, and it also prevents you from missing a loan payment.
If you have been in your home for some time, you may want a home equity line of credit (HELOC). Like a credit card, this is a revolving line of credit against which you can borrow and make purchases. However, your credit limit is based on the amount of equity you have in your home. Furthermore, the rates for these loans are lower than they are for credit cards because your equity is held as collateral. If you need to borrow money, a HELOC is often the cheapest way to do so.
Finally, you can often get great Canadian mortgage rates on cash back mortgages. At closing, a cash back mortgage loan gives you up to 7 percent of the loan’s principal balance in cash to spend on whatever you want. This is not free money, but the cash back is not added to your loan principal. Instead, you pay a higher overall interest rate on a cash back mortgage than you do on a standard mortgage. Over time, this higher interest rate allows the bank to earn back the money it advanced to you at closing and then some. Those who are buying their first home may find this option especially attractive because it gives them cash for furniture and other needs.
Get The Best Mortgage Rates in Canada
Whatever loan or rate structure you choose, we can help you get the best current mortgage rates in Canada. Canadian residents can get free rate quotes and comparisons by choosing a rate on this page or by filling out the online mortgage application form. Do not hesitate, for great savings are just a mouse click away!
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