What Is Your Best Mortgage Rate?

This is a question that we get asked daily: What Is Your Best Mortgage Rate? The only way to properly answer that question is to get more information first. Now you may interpret this as stalling or trying to strategize a sales pitch – but it is not. Walking up to a mortgage broker and saying: “What Is Your Best Mortgage Rate?” would be like walking into a grocery store and asking for the best price. The staff member would likely answer: on what??? Bananas?

Down Payment

Probably the biggest determining factor to answer What Is Your Best Rate is what percentage you are putting down on the home (assuming you are buying a home). If you are refinancing, then the minimum is 20%. If you are purchasing, the minimum is 5%. The absolute best rates are given when you put less than 20% down (or you put more than 35% down). Why? Less risk for the banks = better rate. If you are putting less than 20% down on a purchase, the mortgage is insured (and you pay for it). More on that here.

Credit Score

What Is Your Best Mortgage Rate? What is your credit score? If you have an excellent credit score and history, you will be rewarded with the best rates. Bank obviously do not like to see collections or bankruptcies. But those aren’t always reflected in a score (or “beacon score” as they call it). In other words, you can have a good score with bankruptcies and/or collections in your history. As a general rule of thumb, banks are looking for a score of at least 680 to be entitled to great rates; above 700 is best. 800+ is amazing. Less than 600 and it would be hard to find a bank to consider you.

Insurable vs. Uninsurable

Some banks will “bulk insure”. Meaning that they will insure a group of mortgages even though the purchasers have put >20% down. Why? This reduces the bank’s risk. Sometimes the bank will require the borrower to pay for the insurance up front, or they may pay it on their behalf. But the point is, if your mortgage is insurable, you will get a better rate. Refinances are considered uninsurable. Let’s get that out of the way. A mortgage for a purchase is considered insurable when the borrower has excellent income and excellent credit (both exceeding certain thresholds).

Amortization

It may seem counterintuitive but if you want to stretch out the amortization of your mortgage from 25 years to 30 years, firstly, only certain lenders will even entertain it. Secondly, they usually add a premium to the rate. You will pay more interest over the course of 30 years vs. 20, and the bank will make more money, but there is a risk associated with extending the amortization and as I mentioned before: more risk = higher rate!

So if you ask us What Is Your Best Mortgage Rate? Please consider those points above and let us do the shopping for you!

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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