Buying a home is a dream come true, and Durham Region has many spectacular homes to choose from. For those who have been working hard to save up, it can be a tough awakening when a mortgage rate is offered to you that makes that dream home slip out of sight. If you are considering shopping for a home, consider these tips that will help you understand how to get the best mortgage rate.
Shop Mortgage Brokers
Many people are afraid of the costs associated with using a broker; however the cost is typically offset by the savings these trained professionals can offer. Often the fee is actually paid by the lender when a successful agreement is put into place. As such, these brokers generally have nothing but the best interest of the buyer at heart. Their job is to shop the financial markets and use their relationships and negotiation skills to produce the most optimal rate for you, the home buyer.
Save Up for a Larger Down Payment
When it comes down to it, you'll learn how to get the best mortgage rate when you have more money to offer for a down payment. If you're able to put 20% down, your loan decreases dramatically, meaning the banks are likely more willing to give you a lower rate because you're more capable of paying a smaller principle.
Change Your Term
A twenty-five year mortgage will often have a considerably different rate than a ten-year mortgage. If you're willing to consider the possibilities of changing your term, you might open yourself up to enormous possibilities when you're trying to figure out how to get the best mortgage rate. Typically the longer your mortgage term is, the higher the interest rate is. Though long mortgage terms mean that you can know with certainty what your payments will be throughout the duration of the term, they also mean you will pay more for that comfort.
Fixed vs Variable Rates
When considering mortgages, one of the most important choices is whether a fixed rate or variable rate mortgage is the best choice for you. Traditionally Canadian homeowners prefer fixed rate mortgages as they offer loan recipients a long term, stable payment option. This makes it easier to budget expenses, and plan for future expenses. Variable rates however have recently become more popular than before due to the Bank of Canada’s low interest rates. Variable rates depend on what the mortgage lender’s prime rate is, with some lending institutions adding an extra 1% for variable mortgages that are open.
Choosing between fixed and variable mortgage rates will come down to your financial comfort, and willingness for your mortgage to vary month to month. If you want the comfort of knowing your mortgage rate is the same every month, a fixed rate will be your best mortgage rate. However, if you can afford to take the risk on a variable mortgage rates, they have been shown to be more cost effective during this long term of lower interest rates.
When looking for the best mortgage rate, consider what is best for you. If you can take the time to save up for a larger down payment, this will positively affect your mortgage and its payment. Consider your ammonization period and how long you want your term to be, as the longer it lasts the more money you invest into paying interest. Finally, weigh the pros and cons of a fixed or variable mortgage, as this can be the difference for a significant amount of interest fees. To learn more about how to find the best mortgage rates, and to find your next home, contact us at Mary Roy and Team today!