Purchasing a home as an FTHB (First Time Home Buyer) can be an exciting, yet overwhelming experience. One of the most important factors to consider when buying a home is securing a favorable mortgage rate. A lower mortgage rate can save you thousands of dollars over the life of the loan, so it’s crucial to understand how to get the best rate possible. Here are five tips for first-time homebuyers in Canada to secure the best mortgage rate:
Improve your credit score.
Your credit score is one of the most important factors that lenders consider when determining your mortgage rate. The higher your credit score, the more likely you are to qualify for a lower interest rate. Before you start shopping for a home, take steps to improve your credit score, such as paying down credit card balances and disputing any errors on your credit report.
Shop around for rates
It’s important to compare rates from multiple lenders to ensure you’re getting the best deal. Don’t be afraid to negotiate with lenders to see if they can offer you a better rate. Keep in mind that rates can vary significantly from lender to lender, so it’s worth the effort to shop around. There are some great websites that will scrape the web for current best rates. Places likes ratehub.ca and ratespy.com are great resources to compare with our current rates. One thing to be keep in mind is that some websites may portray “unbiased” options, but then offer an in-house lender that appear to have lower rates than everyone else on their website. Further, it can be very confusing to determine why insured rates are different than uninsured rates. So make sure to compare several sites to get the facts. Our rate finder can help you in your search!
Consider a shorter-term loan
While 25-year mortgages are the most popular option in Canada, a shorter term mortgage like 20 or 15-year can also be a good choice for first-time homebuyers. The shorter term means that you’ll have a higher monthly payment, but you’ll also pay less interest over the life of the loan.
Make a larger down payment
A larger down payment can help you qualify for a lower mortgage rate. It also means that you’ll have more equity in your home, which can make it easier to sell in the future. If you can afford it, consider making a down payment of 20% or more.
Use a Mortgage Broker
A mortgage broker can help you find the best mortgage rate by shopping around on your behalf. They have access to a wide range of lenders and can often find rates that you wouldn’t be able to find on your own. Sometimes, the interest rate can actually be more competitive getting an insured mortgage instead of uninsured and may make sense to do less cash down! Be sure to choose a reputable broker and shop around to compare fees and make sure you get the best all around savings.
In addition, consider the various types of mortgages available in Canada like fixed-rate mortgages, adjustable-rate mortgages (ARMs), and government-backed loans like Canada Mortgage and Housing Corporation (CMHC) Insured Mortgages. Each of these options has its own set of pros and cons and it’s essential to understand the differences before deciding which one works best for you.
Finally, it’s always a good idea to seek professional advice from a financial advisor or a mortgage specialist, who can help you understand the market trends, the options available and the terms and conditions of the loan. With the right advice, you can make an informed decision and secure the best mortgage rate to help you achieve your dream of homeownership in Canada. Book an appointment with one of our brokers today to get free advice on your best options.
