Mortgage Rates & How to Get the Best Deal
A 0.25% difference in your mortgage rate can save you over $10,000. Here's how to get the best rate possible.
How Mortgage Rates Work in Canada
Mortgage rates are influenced by several factors:
Fixed Rates
Tied to the Government of Canada bond yields (specifically the 5-year bond). When bond yields rise, fixed rates rise. When they fall, fixed rates follow.
Variable Rates
Tied to the Bank of Canada's overnight rate, which influences the prime rate. Variable rates are expressed as "prime minus X%" (e.g., prime - 0.50%).
What Affects YOUR Rate
Two people can get different rates from the same lender. Here's what matters:
| Factor | Impact |
|---|---|
| Credit Score | 680+ for best rates. 750+ for premium rates. |
| Down Payment | 20%+ avoids CMHC insurance. Insured mortgages sometimes get lower rates. |
| Debt-to-Income | Lower debt ratios = better rates |
| Employment | Stable employment with steady income preferred |
| Property Type | Single-family homes get better rates than condos or rentals |
| Mortgage Amount | Very small mortgages (<$100K) may get higher rates |
Where to Compare Mortgage Rates
1. Mortgage Brokers
Brokers shop multiple lenders for you. They're paid by the lender, so their service is usually free to you. They often get rates lower than what you'd find walking into a bank.
🏆 Best option for most people
2. Big Banks
TD, RBC, BMO, Scotiabank, CIBC. Posted rates are usually higher, but you can negotiate. Convenient if you want everything under one roof.
3. Credit Unions
Often competitive rates with more flexibility. Servus, Meridian, Vancity, and others may offer unique products.
4. Online Rate Comparison Sites
Ratehub.ca, RatesSpy, and nesto let you compare rates from multiple lenders instantly. Great starting point for research.
7 Tips to Get the Best Mortgage Rate
Boost Your Credit Score First
Pay down credit cards, don't open new accounts, and check for errors on your credit report. Even 20 points can make a difference.
Use a Mortgage Broker
They have access to 30+ lenders and can often beat bank rates. Their service is free to you.
Get Multiple Quotes
Get at least 3 quotes. Use the lowest one to negotiate with others. Banks will often match or beat a competitor's rate.
Consider a Shorter Term
3-year fixed rates are often lower than 5-year. If you might move or refinance, a shorter term could save money.
Increase Your Down Payment
A larger down payment reduces lender risk. If you can hit 20%, you avoid CMHC insurance entirely.
Ask About Rate Holds
Most lenders will hold your rate for 90-120 days. If rates drop before closing, you get the lower rate. If they rise, you keep the held rate.
Don't Just Look at the Rate
A low rate with restrictive prepayment options or huge penalties could cost more in the long run. Read the fine print.
💡 The Real Cost of 0.25%
On a $400,000 mortgage over 25 years, a 0.25% rate difference means about $12,000 in extra interest. That's worth a few phone calls.
Understanding Mortgage Penalties
If you break your mortgage early, you'll pay a penalty:
Variable Rate Penalty
3 months' interest — usually $2,000-$5,000. Relatively affordable.
Fixed Rate Penalty
Interest Rate Differential (IRD) or 3 months' interest, whichever is higher. IRD can be $10,000-$30,000+. This is why fixed rates are expensive to break.