How Do I Choose A Mortgage Lender
A lender should be relatively affordable. You shouldn’t need a super high credit score or down payment to get a loan. You also want it to offer good rates and charge reasonable fees.
Once you’re ready to start shopping for homes, apply for preapproval with your top three or four choices. A preapproval letter states that the lender would like to lend you up to a certain amount, at a specific interest rate. When you’re preapproved, your mortgage rate is locked in for 60 to 90 days. With a few preapproval letters in hand, you can compare each lender’s offer.
When you apply for preapproval, a lender does a hard credit inquiry. A bunch of hard inquiries on your report can hurt your credit score unless it’s for the sake of shopping for the best rate.
If you limit your rate shopping to a month or so, credit bureaus will understand that you’re looking for a home and shouldn’t hold each individual inquiry against you.
Historical Mortgage Rates: 1971 To 2020
In 1971, the same year when Freddie Mac started surveying lenders, 30-year fixed-rate mortgages hovered between 7.29% to 7.73%. The annual average rate of inflation began rising in 1974 and continued through 1981 to a rate of 9.5%. As a result, lenders increased rates to keep up with unchecked inflation, leading to mortgage rate volatility for borrowers.
The Federal Reserve combated inflation by increasing the federal funds rate, an overnight benchmark rate that banks charge each other. Continued hikes in the fed funds rate pushed 30-year fixed mortgage rates to an all-time high of 18.63% in 1981. Eventually, the Feds strategy paid off, and inflation fell back to normal historical levels by October 1982. Home mortgage rates remained in the single-digits for much of the next two decades.
The mortgage rates trend continued to decline until rates dropped to 3.31% in November 2012 the lowest level in the history of mortgage rates. To put it into perspective, the monthly payment for a $100,000 loan at the historical peak rate of 18.63% in 1981 was $1,558.58, compared to $438.51 at the historical low rate of 3.31% in 2012.
This year, interest rates are expected to stay around 3.8%, according to Freddie Mac. This is good news for consumers as home prices continue to rise.
What Is The Cheapest Mortgage For First
In general,interest rates are highest for buyers with a deposit of between 5% and 10%, as there are fewer lenders willing to accept customers at the riskier end of the market.
For first-time buyers with a 10% deposit, the cheapest rate is 1.74% for a two-year fix with HSBC.
Buyers with a deposit of at least 15%, however, will find there is a greater choice of lenders, and therefore more competition on price. Rates can be found as low as 1.39%.
Buyers with a deposit of at least 15% will find there is a greater choice of lenders
Aside from comparing interest rates, it is important to look at mortgage fees some deals charge upfront or exit fees, while others dont.
It is often the case that headline-grabbing low rates also come with the highest fees, which can make a significant difference to the overall amount you pay over the term of the deal.
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Tips To Find The Best Mortgage Rates
This is not the time to let somebody else do the shopping for you. As we saw just now, the terms you get can make a sizable difference in what you pay to borrow the same amount of money.
How do you avoid paying more than you need to for your mortgage? Certainly, compare the offers you get by running them through your online mortgage calculator to see what your payments and interest will be. And as you door even before you dofollow the steps below.
Should I Use An Ontario Mortgage Broker
Ontario mortgage brokers often have the lowest rates in the province, particularly for default-insured mortgages. And theyre generally free of charge for qualified borrowers. Ontario brokers also tend to provide better advice than many lender representatives since they specialize in mortgages and deal with multiple lenders. Note that all brokers must be licensed by the Financial Services Regulatory Authority of Ontario. Heres a link to see if your broker is licensed.
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Do I Need Cmhc Insurance
UnderOffice of the Superintendent of Financial Institutions regulations, you are required to purchase CMHC insurance if your down payment is below 20%.
You may beineligible for CMHC insuranceif:
- your purchase price is $1,000,000 or above, or
- your amortization period is longer than 25 years.
In these cases, you must make a down payment of 20% or higher.
How Does A 5
A 5-year fixed mortgage rate remains the same during the 5-year mortgage term. At the end of 5 years, you must pay off the mortgage in full or refinance into a new loan term.
The loan term is usually different than the amortization period, which is the total length of time you plan to finance your home. For example, a loan may have a 25-year amortization period, which means you are expecting to pay off your home in 25 years. With a 5-year fixed mortgage, the fixed rate that you pay for each 5-year period may differ, effectively meaning that you could pay 5 different 5-year fixed mortgage rates while you are paying off your home.
Pros of a 5-Year Fixed Mortgage Rate
Stability You know that your mortgage interest rate is locked in for a set period. Time Savings Since your rate is locked in, you dont have to worry about taking time in the near future to renegotiate a rate. Market Hedge The 5-year fixed-rate mortgage protects you if you think that rates are going to fluctuate widely in the next 5 years.
Cons of a 5-year Fixed Mortgage Rate
Cost Fixed-rate mortgages often have higher rates than variable-rate mortgages. Permanence Average fixed rates might drop during your mortgage term, and it can be costly to renegotiate your loan before the end of the 5-year term to get a lower rate.
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How To Lock The Interest Rates At The Lowest Point
Locking the mortgage interest rate is like buying/selling a stock. It is hard to predict where the lowest point is.
Will the mortgage interest rates be lower tomorrow? Even mortgage traders don’t know the answer.
However, we know if the rates are low in general. For example, mortgage interest rates are at an all-time low now. 30 Year Fixed-rate mortgages are around 3%. This is a low point in general. It’s a good time to lock the interest rate now.
Sometimes mortgage companies offer promotions, but they don’t advertise online. As a result, most people are unaware of these promotions. Thats where youre in luck! Our website MRateQuote.com works with loan brokers from multiple big banks and small brokers. You only need to fill out basic information then you will get quotes from 3 loan brokers. If you find a loan broker that offers a much lower rate quote than others, that lender is probably promoting that mortgage product. You better lock on that rate immediately!
Should You Buy Mortgage Points
Many lenders sell mortgage points . Buying points means youâd pay more up front to lower your mortgage rate which could save you money long-term. A mortgage discount point normally costs 1% of your loan amount and could shave 0.25% off your interest rate.
With a $200,000 mortgage loan, a point would cost $2,000. Buying two points would cost $4,000 which would be due, in cash, when you close the loan. These two discount points would translate into a 0.5% reduction to your interest rate.
Discount points could pay off but only if you keep the home loan long enough. Selling the home or refinancing the mortgage within a couple of years would short circuit the discount point strategy. But if you stayed in the loan indefinitely, you’d reach a break-even point after which the discount points would save you more and more over time.
Often, spending cash on a down payment instead of discount points saves more unless you know for sure you’re keeping the loan for years. If a larger down payment could help you avoid paying PMI premiums, put the money toward your down payment instead of discount points.
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Canada Vs Usa Mortgage Terms
Canadas mortgage term lengths are relatively short when compared to mortgages in the United States. The most common mortgage in the U.S. is the 30-year fixed mortgage, which means that homeowners dont need to renew their mortgage for the entirety of their amortization. This is a large departure from the Canadian mortgage market, where homeowners expect to renew and renegotiate their mortgage rates often.
The Mortgage Guarantee Scheme
This scheme launched in April 2021 with the aim of encouraging lenders to offer 95% LTV mortgages for people buying properties worth up to £600,000. Through the scheme, the government guarantees to compensate lenders for a portion of their losses should the borrower be unable to repay the mortgage. Deals are open to any buyer with a 5% deposit, not just first-time buyers.
First Homes scheme
The First Homes scheme gives first-time buyers up to 50% off a new-build property, and is aimed at people priced out of their local area and key workers such as NHS staff, police and teachers. Eligible first-time buyers are guaranteed a discount of at least 30% of the typical market rate for the local area. Find out more here about how it works.
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Determine What Mortgage Is Right For You
When finding current mortgage rates, the first step is to decide what type of mortgage best suits your goals and budget. Most borrowers opt for 30-year mortgages, but thats not the only choice. Typically, 15-year mortgages have lower rates but larger monthly payments than the more popular 30-year mortgage. Adjustable-rate mortgages usually have lower rates to begin with, but the downside is that youre not locked into that rate, so it can change over the life of your loan.
Do I Get A Lower Rate If I Make A Bigger Down Payment
Generally, not. The lowest rates in Canada are typically offered on default insured mortgages. Those are for people who put down less than 20% on their home purchase. Low insured rates are also available to people who transfer their already-insured mortgage to a new lender. Those who put down 20% or more get conventional rates, which are usually higher than insured rates. Occasionally, however, someone putting down 35% or more on a home purchase under $1 million can get great rates similar to high-ratio rates.
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Mortgage Life Insurance Premiums
|National Bank Life Insurance Company||$150,000|
Similar to mortgage life insurance, your cost of critical illness insurance is based on the insured mortgage balance. For example, if your premium rate is $0.45 per $1,000 of mortgage balance, and your mortgage balance is $500,000, then your cost of disability insurance will be $225.00 per month.
If your maximum coverage amount is less than your mortgage balance, then your mortgage balance is only partially covered. Once your mortgage balance falls below the maximum coverage amount, then your mortgage balance will begin to be fully covered.
For example, National Banks critical illness insurance has a maximum coverage of $150,000. If you have a mortgage balance of $500,000, your insured amount is $150,000. You are only charged insurance premiums on the insured amount of $150,000, not your full mortgage balance of $500,000. Your insured amount will decrease as your mortgage balance decreases.
Insurance benefits and payouts are not taxable. This means that if you are eligible for a critical illness claim and your insured amount was $150,000, then a maximum of $150,000 will go towards paying down your mortgage balance.
Whats More Important: A Low Mortgage Rate Or Low Fees
Its just as important to compare upfront loan costs as it is to compare mortgage rates.
Your interest rate might seem much more important because its with you for the life of the loan. But upfront fees can make a big difference especially if youll only be in the house a few years.
Remember that most people who get a 30-year mortgage dont keep their loan the full 30 years. In fact, homeowners keep 30-year loans for just 7 years on average. And when youre only paying interest over a short period, those upfront fees start to carry more weight compared to your interest rate.
Lenders might emphasize either low closing costs or low rates to make an offer look more attractive, while raising the other number.
In addition, lenders will sometimes emphasize one number or the other to make an offer look more attractive than it is.
For instance, lenders might advertise low- or no-fee mortgages, saying theyll cover the upfront costs for you. But these loans typically have a higher interest rate.
Other lenders might emphasize ultra-low interest rates but charge higher origination fees or discount points to make up for it.
So when youre shopping for a mortgage, read your rate quotes thoroughly. Look at rates, upfront fees, and your total estimated closing costs to make sure youre getting the best deal overall.
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Save Up A Solid Down Payment
Your down payment directly impacts your loan-to-value ratio, so its very important when youre seeking the best rate. -Michele Skipper
Another great way to get a better rate is to increase your down payment. Though sometimes you can get away with a lower down payment, typically, you want to save at least 20% of the cost of your home as a down payment.
The bigger your down payment, the less your lender has to loan you and the smaller the risk you pose. And if youre a lower risk borrower, youll probably get lower interest rates as a result.
Montreals Housing Market And Home Prices
Montreal is still a relatively affordable housing market compared to other major cities like Toronto and Vancouver, but prices are going up. Benchmark prices for single-detached family homes in Montreal increased from $392,400 to $471,900 between November 2019 and November 2020.
Other forms of housing, such as townhomes and apartments also saw increases. The average price of a townhouse in Montreal reached $435,500 in November 2020 , and the average price of an apartment reached $323,400 .
The price increases in Montreal last year can largely be attributed to an increase in sales volume between 2019 and 2020. In November 2020, the Quebec Professional Association of Real Estate Brokers reported 5,343 properties sold, an increase of 32% from the same time last year.
Single-family homes in the Montreal area take an average of 37 days to sell, compared to 44 days for condominiums.
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Don’t Forget The Cost Of A Mortgage
When shopping for mortgage interest rates, don’t forget to compare the cost as well. It is common for some lenders to charge you a thousand dollars more in fees than other lenders.
The closing cost of a mortgage includes many items. Usually, you just need to compare the origination fee. The origination fee is a fee charged by the mortgage company.
Mortgage companies give different names for origination fees, eg., underwriting fee, lender fee, etc. You can ask loan officers, “what is your Total origination fee?”
When you apply for a mortgage, the loan officer will send you a loan estimate form in three days. Origination is on section A of this form.
Many times, people who come to our website to shop for interest rates ask me the same question:
Why did my colleagues/friends get a rate of x.xx%, but I get a much higher rate of x.xx%?
Mortgage interest rates vary based on borrower’s credit scores, loan amount and home value ratios , house types, etc.
Do you want to know
How do mortgage companies set mortgage interest rates based on borrowers’ different situations?
How to make small adjustments and quickly get a lower mortgage interest rate?
Please to my blog, and we will talk more about these and many more topics.
Are Mortgage Rates Impacting Home Sales
The number of mortgage applications ticked up 0.3% for the week ending September 10, according to the Mortgage Bankers Association. The increase takes an adjustment for the Labor Day holiday into consideration.
- Purchase applications were up a seasonally adjusted 8% from the previous week and 12% lower than the same week last year. On an unadjusted basis, purchase loan volume was 5% lower week-over-week.
- Refinance applications also ticked lower, decreasing 3% from the week prior and 3% lower than the same week last year. Refinancing continued to slow as the share of refi applications dropped to 65% of all applications, the lowest total since July.
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How Long Should You Fix Your Mortgage Rate For
One of the biggest questions when it comes to mortgages is how long to lock in your rate for.
Borrowers most commonly fix for either two or five years. Five-year deals were once significantly more expensive, but the gap has closed in recent years. With this in mind, many borrowers have chosen to fix for longer to protect themselves from rate increases.
This is a good idea in theory, but its not the right move for everyone.
Five-year fixes usually come with high early repayment charges, meaning that you could be charged thousands of pounds if you decide to pay the mortgage back early .
With this in mind, its important to think of your own medium and long-term plans before settling on a mortgage term.