3 Important Tricks to Supplement Your Needs of Great Mortgage Rates in Canada

In financial prospects for seeking a new home, mortgage rates are one of the crucial factors. Today, it's often seen that individuals aspire for low mortgage rates as they doesn't want to raise the bar of tension line that disrupt their chances for getting a new home on easier note with paper work and core consultation. In fact, the mortgage industry examines a number of factors to determine not only if you qualify for a mortgage, but also what interest rate you’ll pay.

 

There’s a lot at stake. Mortgage rates can vary by several percentage points depending on the factors we’ll look at below. The difference can mean a much higher or lower monthly payment and tens of thousands of dollars in interest payments over the life of the loan.


If you hope to get the best mortgage rates possible, you’ll need to make sure that you are well-qualified. Below are some of the key criteria to understand important tricks for mortgage rates in Canada.

 

Credit Scores 

Mortgage lending today is based on tiered pricing, which means that rates are adjusted based on various criteria. One of the main criteria used is your FICO credit score. Your credit score will help to determine whether you qualify for the loan and what rate you’ll pay on your loan, and there is an inverse relationship. The higher your credit score, the lower your mortgage rate, all other things being equal.

 

Debt-to-Income Ratio 

Debt-to-income ratio - also called DTI - comes in two forms. The back-end ratio measures the total of all of your monthly minimum debt payments, plus your proposed new housing payment, divided by your stable monthly gross income. The front-end ratio focuses just on your housing costs, excluding all other debts. Historically, banks have wanted to see a front-end ratio of no more than 28% and a back-end ratio of no more than 36%. Depending on the type of mortgage and other factors, however, these ratios can go higher.


Down Payment 

As a general rule, you’ll need a minimum down payment of 20% of the purchase price of your home in order to get the best mortgage rates. Since mortgages are price adjusted based on risk factors, a loan with 5% down is considered higher risk than one with 20% down, and will carry a higher interest rate.

 

But that isn’t the only reason to save up 20%. When your down payment is less than 20% of the purchase price, you will likely have to pay PMI, or private mortgage insurance.

 

Wrapping Up 

Hence, if you as a user are looking for more guides on seeking great mortgage rates in Canada, never hesitate to connect with RateShop.ca! Based in Mississauga and recognized by CMP, they stand as one of the “Top Independent Brokerages in 2020” to seek information on trending mortgage rates.


Location: Mississauga, ON, Canada

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