When a person purchases a property in Canada, they will most often take out a mortgage. This means that a purchaser will borrow money, mortgage, and use the property as collateral.

It is never forbidden, despite historically low-interest rates, to try to get an even lower rate on a mortgage. The difference, however small, will allow you to save a few thousand dollars. For example, for a loan of 200,000 dollars over 20 years, finally obtaining a rate of 1.6% against the rate of 1.7% that you were initially offered will save you no less than 2,012 dollars throughout the loan.

Several factors can change the interest rate you will be offered. Here is an overview of the points you should focus on getting the best rate.

A good credit report

When it comes time to talk about mortgages, you should know that there are practically as many products (interest rate, term, conditions, etc.) as there are buyers. As a result, there can be no assurance that two separate borrowers applying for a mortgage on the same property will be offered the same rate; in fact, the rates are more likely to be very different.

When evaluating your loan application, a lender uses several criteria to determine the interest rate they will offer you. One of the main things you take into consideration is your credit report. Your record is used to know if you are eligible for a loan and determine what interest rate you will be offered.

What does that mean?  If you have a good credit history, you will get a better rate. Lenders don’t want to lend such a large amount of money to a borrower who doesn’t always make their payments or a borrower who has a lot of credit card debt, for example. If lenders decide to lend money to someone with a bad credit history, they are likely to protect themselves by offering a higher interest rate.

If you’re trying to get the lowest rate, make sure your credit report looks as good as possible. Also, keep your credit card balances as low as possible (not having any at all would be ideal) and pay off your other debts as much as possible.

 High income

For the same reasons mentioned above, lenders won’t offer you the best interest rate if they think you won’t pay them back on time. You can reassure them by proving that your income will be sufficient to repay them.

You are going to have to prove that you have a stable job. Lenders want to know that you will continue to make enough money to keep you from “skipping” payments. Ideally, lenders want to see that you have kept the same job without a break for at least two years.

Income is not all equal. You have no doubt already understood that lenders are allergic to risk. This means that when evaluating the records of two applicants with similar income levels, lenders will favour the applicant whose income source is considered more stable. Specifically, they tend to prefer full-time employees. For them, self-employed, commissioned, or full-time employees (to name a few) pose a higher risk and, therefore, will be offered a higher rate.

Shorten the term of the loan

The longer the term of your loan, the higher your rate will be. However, if you can shorten the term of your credit, for example, borrowing over 20 years rather than 25, this will also allow you to get a better rate.

Play the competition

This process takes more time, but it is essential for obtaining a better rate. Concretely, make an appointment with several banks to compare their proposals and then compete with them until they obtain the lowest possible rate. You can even do this roundtable multiple times. But start with your bank, where you are already “known”. Then, if you get a better deal elsewhere, ask your bank if they can offer you the same or better, knowing that you are already one of their customers. Instead of going to different banks to compare their proposal, you can take advantage of HomeWise online application process. Once you apply on their website, Homewise’s technology negotiates with over 30 banks and lenders to match consumers with tailored mortgage options

The best rate, a myth?

Yes, the best rate exists. The problem is, it can be frustrating to find it. And very long. However, we’ve come with great news. With an easy online application process, just about everyone can take advantage of Breezeful to help find a respectable mortgage rate that they can afford. Specials change daily so make sure to email or call to find out what they can offer to you.