Selecting the right mortgage is one of the most important financial decisions you’ll make, whether you’re buying a home or refinancing. While securing the lowest interest rate is a key goal, there are several other factors that can significantly affect your total costs. Comparing mortgage rates in Canada helps ensure you get the best deal for your situation. Here’s how to do it effectively.
Step 1: Decide What You’re Comparing
The first step is to know what factors you’re comparing. Mortgages differ based on several elements. Focus on these:
Interest Rates: This is the percentage cost of your loan. Don’t just look at the lowest rate consider the overall cost of the mortgage over time.
Total Costs: The total mortgage cost includes fees, penalties, and total interest over the term. Compare all expenses to understand the true cost.
Flexibility and Features: Some mortgages include features like prepayment options or penalties for early payoff. Review what’s included before deciding.
Step 2: Compare the Same Type of Mortgage
Always compare mortgages of the same type to make fair evaluations.
Variable vs. Fixed Rates: Variable-rate mortgages start lower but can fluctuate, while fixed-rate mortgages offer stability at a potentially higher cost. Choose based on your comfort with changing payments.
Open vs. Closed Mortgages: Open mortgages allow early repayment without penalty, while closed ones may have restrictions but often lower rates.
Step 3: Gather Quotes from Multiple Sources
Collect mortgage quotes from various lenders to find the most favorable option.
Banks: Major lenders like RBC or TD offer competitive rates but only on their own products.
Credit Unions: Often provide lower fees and rates since they’re member-owned.
Mortgage Brokers: Give you access to multiple lenders at once and help compare different programs more efficiently.
Step 4: Examine More Than Just the Interest Rate
The interest rate isn’t the only factor that affects your mortgage cost.
Interest Rate Details: Ask about “special” or discounted rates and any attached conditions.
Fees: Check for hidden costs like application fees, legal charges, or prepayment penalties.
Prepayment Options: See if you can make extra payments without penalties to reduce your principal faster.
Amortization Period: This determines how long it takes to pay off your mortgage. A longer term lowers payments but increases total interest.
Term Length: Typical mortgage terms in Canada range from 1 to 10 years. Shorter terms may offer flexibility, while longer ones provide rate stability.
Portability: If you plan to move before your term ends, check if your mortgage can be transferred to a new property.
Step 5: Use a Mortgage Calculator
A mortgage calculator helps you easily compare options.
Monthly Payments: Estimate your payments under different rates and terms.
Total Interest: Understand how much interest you’ll pay over the full mortgage period.
Step 6: Ask Questions Before Making a Decision
Before finalizing your choice, clarify key details.
- What happens if I pay off the mortgage early?
- Can the rate change during the term (for variable-rate mortgages)?
- Are there any hidden fees or conditions I should know about?
Step 7: Get Mortgage Pre-Approval
Once you’ve compared rates, apply for mortgage pre-approval. This step shows lenders that you’re a serious borrower and helps determine how much home you can afford. Pre-approval also positions you to secure better mortgage rates and avoid surprises during the buying process.
At Emerald Finance Group, our experienced mortgage brokers help you compare rates, review options, and choose the right mortgage plan for your financial goals.