How to Get the Best Mortgage Rate
Are you new to the housing market and looking for your first mortgage? Perhaps you already have a mortgage but you’re looking for a better rate? Or maybe your mortgage is up for renewal? Regardless of your situation, here’s our checklist to help you find the Best Mortgage Rate.
Step One: Do your Prep work First
Dig out your mortgage documents. Typically these can be found in the bottom of a filing cabinet or in a pile of papers labeled ‘important documents’ – while discount flyers for the local pizza place are often filed away more strategically.
Familiarize yourself with the terms of your contract – who is your current lender? What interest rate are you currently paying? What type of mortgage are you on? When are you due to refinance and what’s the penalty for breaking your existing agreement? This type of information is needed to determine your options.
If you’re a first-time homebuyer, get your budget in order and figure out how much you can afford to borrow. Make sure you have a clear understanding of the costs associated with home ownership so you don’t over-stretch yourself.
Step Two: Speak to your Existing Lender or Shop Around
Find out what rate your current lender is offering new customers. If you’ve been loyal to your lender and can show a track record of making payments on time, ask to be rewarded with the same introductory offer.
Call the customer service department and let them know that you’re looking around for a better rate. Depending on your contract, they may offer you a new blended rate, a combination of your existing mortgage product and a new mortgage product, which will result in a lower rate than the one you’re on now.
Compare this offer to the competition, including brokers and specialty lenders. Many lenders are making a grab for market share and as a result are offering some pretty attractive deals. Switching lenders might result in some extra paper work, but more often than not the savings are well worth the time.
Step Three: Get some Professional Advice
Let’s be honest, very few people understand the pros and cons of the different mortgage options. Fixed or Variable? Monthly payments or bi-weekly rapid? The questions are endless.
A mortgage broker can provide personal advice about which product is best for you. They can help you to determine if it’s worth refinancing at current rates given the penalty that you’ll be charged to break your existing agreement. And best of all, a mortgage broker is more likely to find you the best mortgage rate.
The Canadian Association of Accredited Mortgage Professionals recently found that the average Canadian who renewed or renegotiated through a broker saw their interest rate reduced by an average of 125 points, compared with 114 among those who dealt directly with a bank or credit union.
Step Four: Lock in a Low Rate
If you’re still on the fence about switching lenders, consider getting pre-approved by the new lender to lock in the rate. At a time when many are concerned about mortgage rate increases, this is certainly worth taking advantage of. Most pre-approvals hold your rate for up to 120 days at no charge.
This is also a great option if you’re in the market for buying, but haven’t yet found that dream home. With a rate hold you don’t need to rush your new home purchase just because you’re afraid rates are going up.
Step Five: Remember Your Renewal Date
You should start shopping for a new and better mortgage rate 120 days before your mortgage contract is up for renewal. If you forget about your renewal date and only give yourself a few days to shop around, compare the market and sort out a new deal, you’re bound to feel the pressure and might be tempted to just stick with your current lender out of convenience.