BMO Fixed vs. Variable Rate Mortgages Archives

About Bank of Montreal Mortgages

The Bank of Montreal (BMO) is one of Canada’s Big Six banks and has operated since 1817.

Its head office is in Montreal, Quebec. The head executive offices are in Toronto, Ontario.

As Canada’s first bank, BMO offers a full suite of banking products, including personal banking, business lending, investing, and wealth management services. It also offers a wide selection of mortgage solutions.

BMO mortgages are available for purchasing or refinancing homes, rental properties, vacation properties, and land. You can choose from variable and fixed-rate mortgages, with flexible terms ranging from 6 months to 10 years. BMO also offers open and closed mortgages and specialty products like the Homeowner ReadiLine and mortgages for self-employed borrowers.

This article provides an extensive overview of BMO mortgage rates, features, fine print, and customer satisfaction. Read on for a detailed guide to help you make an informed decision on a BMO mortgage.

Best BMO Mortgage Rates

To secure the best rates, it is critical to consider the type and features of a BMO mortgage. Here are some key decision factors:

BMO Mortgage Prime Rate

BMO’s prime rate is currently 6.45%. Variable-rate mortgages and lines of credit move based on changes to the prime rate.

BMO Posted vs Discounted Rates

BMO’s posted rates are their standard rates, while discounted rates provide special savings off the posted rates. Things to consider:

Discounted rates are temporary and can disappear anytime.
You may need to meet eligibility requirements for special rates.
Posted rates provide a reliable benchmark for comparison.

Review both types when shopping for the best BMO mortgage rate.

BMO Fixed vs Variable Rate Mortgages

With a fixed-rate mortgage, your interest rate and payment stay the same for the full term. A variable rate fluctuates based on the prime rate.

BMO’s current 5-year fixed rate is 6.79%, while its 5-year variable is 6.45%. The variable offers lower initial payments but carries the risk of increases if the prime rate rises.

BMO Smart Fixed Mortgages

One unique mortgage product BMO offers is the Smart Fixed mortgage, a closed fixed-rate mortgage. It offers a discounted rate compared to BMO’s standard fixed-rate mortgages in exchange for agreeing to some limitations on prepayment flexibility.

Features	Smart Fixed Mortgage	Fixed-Rate Mortgage
Prepay in the first five years	No	Yes
Prepayment Limit	Up to 10%	Up to 20%
Interest rate	Lower	Higher

A Smart Fixed Mortgage’s lower costs and predictable payments may appeal to borrowers who want payment stability and do not foresee needing to make major prepayments during their term.

To be eligible for the Smart Fixed lower rate, you must meet specific criteria:

Minimum credit score of 600
GDS and TDS ratios under 39% and 44%, respectively
Live in the home you get a mortgage for

BMO Convertible Mortgages

BMO convertible mortgages let you change from a variable to a fixed rate during your term without penalty. This allows you to lock in a fixed payment later if variable rates increase.

Shorter vs. Longer Terms

Short terms (under 3 years) provide flexibility to renegotiate your rate sooner if market rates drop. However, you’ll have to renew more frequently.

Long-term (over 3 years) means rate and payment stability. But you’re locked in even if better rates become available.

BMO offers terms from 6 months up to 10 years. Choose based on your budget outlook and rate forecast.

BMO Closed vs Open Mortgages

Closed mortgages lock you into a contract with limited prepayment flexibility but at lower rates. BMO’s closed rates are 0.5% to 2% cheaper than its open rates.

Open mortgages allow prepayment anytime without penalties but have higher interest costs over the term. Open mortgages make sense if you plan to sell soon.

Rate vs. APR

Focus on the Annual Percentage Rate (APR), not just the base rate alone. The APR shows the total yearly borrowing cost, including fees. Even small APR differences significantly impact your long-term costs.

What are Current BMO Mortgage Rates?

Current BMO Mortgage Rates

BMO Posted Mortgage Rates

Term Length	BMO Posted Rate
1-Year Fixed	7.74%
2-Year Fixed	7.34%
3-Year Fixed	6.95%
4-Year Fixed	6.74%
5-Year Fixed	6.79%
5-Year Smart Fixed	6.69%
6-Year Fixed	6.99%
7-Year Fixed	7.05%
10-Year Fixed	7.45%
10-Year Smart Fixed	7.35%

BMO posted fixed closed mortgage rates as of Sep12, 2024

BMO Mortgage Products

In addition to its standard mortgages, BMO offers specialty mortgage solutions for unique borrowing needs:

BMO Self-Employed Homeowner Mortgage

Self-employed individuals qualify for the same BMO mortgage rates and terms as other borrowers. However, you’ll need to provide supplemental income documentation such as:

Last two years’ tax returns and Notices of Assessment
Audited financial statements
Statement of business activities
Notice to reader financial statements

BMO Investment Property Mortgage

For investment properties, BMO requires a minimum 20% down payment. If you occupy part of the property, you may qualify for as low as 5% down by obtaining mortgage loan insurance.

Other considerations for an investment property mortgage include:

Property valuation and capitalization rate
Location desirability
Expenses like taxes, insurance and maintenance

BMO US Mortgage

As a Canadian, you can leverage your Canadian credit history to qualify for a US mortgage through BMO’s American subsidiary, BMO Harris Bank. This helps if you have a limited US credit history.

You’ll need to provide financial documents including:

Tax returns and Notice of Assessments
Proof of income
Bank statements
IDs
Property tax and insurance details

US mortgage rates and terms vary. BMO Harris offers fixed and adjustable rate mortgages up to $2 million USD.

What are the key features of BMO Mortgages?

BMO Mortgage Features

In addition to competitive rates, BMO offers several features that provide useful flexibility:

130-Day Rate Hold

BMO provides a 130-day rate lock on pre-approvals for fixed-rate mortgages, the longest offered among Canada’s major banks. This locks in your rate for 4+ months during the home-buying process.

BMO Mortgage Prepayment Options

BMO allows extra prepayments to pay your mortgage down faster.

1. Increase your payments – For most mortgages, you can increase your payments by up to 20% annually. For Smart Fixed mortgages, the limit is 10%.

2. Make lump sum payments – You can make lump sum prepayments up to 20% of the original mortgage annually (10% for Smart Fixed mortgages). These payments go directly against your principal.

BMO Accelerated payment options

You can make mortgage payments more frequently – weekly or bi-weekly – to reduce your principal faster. This lowers the amount of interest accrued between payments.

Mortgage Protection Insurance

BMO lets you add optional mortgage life, disability and critical illness insurance to cover payments if you cannot work.

Property Tax Payments

Your mortgage contract may require you to make monthly property tax payments to BMO in addition to your regular payments. This ensures taxes are paid on time.

BMO Homeowner ReadiLine

This product bundles a mortgage with a revolving home equity line of credit. As your mortgage balance decreases, your available credit increases. This consolidated option provides stability while allowing you to access funds if needed.

RBC Mortgage Cashback Offer

In addition to competitive rates, BMO also provides special offers for new mortgages that can provide further savings.

One of their current promotions is an attractive cashback reward of up to $4,100 for new mortgages of $500,000 and above with terms of 3 years or longer.

You must set up a new or existing BMO chequing account to make your mortgage payments to qualify. The cashback reward tiers are:

Mortgage amount up to $500,000: $1,000 cashback
Mortgage amount $500,000 to $750,000: $2,000 cashback
Mortgage amount $750,000+: $3,000 cashback
Mortgage amount $1 million+: $4,000 cashback

This cashback amount is deposited to your BMO chequing account within 90 days of funding your new mortgage. It provides an extra incentive to choose BMO for your new home loan.

This offer is available from September 5, 2024, to November 5, 2024. Check BMO’s website for full details and any changes to the offer terms.

(Source: https://www.bmo.com/main/personal/mortgages/special-offers/)

Cashback rewards help reduce your overall mortgage costs. When shopping different lenders, make sure to see what current promotions are available, as attractive signup bonuses can provide substantial saving

How do you get pre-approved for a BMO mortgage?

Getting pre-approved starts the mortgage process off right. Here are your options with BMO:

Online – BMO allows full online pre-approval by submitting documents through their website. The online process is straightforward.

In-person – You can also meet with a mortgage specialist at one of 900+ BMO branches. This allows you to ask questions and get personalized advice.

Documents needed – Provide financial information such as tax returns, pay stubs, IDs, and property details.

Once approved, you can shop knowing your budget and terms. Take advantage of BMO’s industry-leading 130-day rate hold to lock in your rate.

Tips to Get the Best BMO Mortgage Rate

Here are some tips that may help you get approved for better BMO mortgage rates:

Improve your credit score – A higher credit score signals you are at lower risk.
Make a larger down payment – 20%+ down avoids mortgage insurance.
Reduce existing debts – Less debt improves your ability to carry a mortgage.
Provide strong financial records – Documents that demonstrate you can make payments.
Consider having a cosigner – Having a second borrower with good credit can help.
Negotiate – Discuss getting the best possible rate for your situation.

The stronger your financial profile, the better mortgage rate you can qualify for.

What are Alternatives to BMO mortgages?

BMO is just one option among hundreds of mortgage lenders in Canada. Here are some strong alternatives to consider:

Mortgage Brokers – A broker shops multiple lenders and negotiates on your behalf. They can access better non-bank rates you can’t get directly.

Credit Unions – Credit unions offer very competitive rates and excellent customer service. First National and Meridian Credit Union are the top options.

Monoline Lenders – Specialized mortgage lenders like MCAP and First National provide online applications and low rates.

Online Banks – Digital banks like Tangerine feature fast e-approvals and discounted promotions.

Shop around and compare quotes to find your best fit.

More Guide on Top Banks for Mortgage in Canada

Looking for the Best Mortgage Options? Discover our Best Banks for Mortgages in Canada

The Bottom Line

As one of Canada’s largest banks, BMO provides various mortgage products, competitive rates and valuable features. Comparing quotes from alternative lenders ensures you get your best personal deal. With smart shopping, a BMO mortgage could suit your home loan needs.

For personalized mortgage advice on BMO Mortgage for your unique situation, contact our mortgage brokers at Best Mortgage Online, who can help you find the best mortgage option and save thousands.

FAQs

What is the minimum down payment for a BMO mortgage?

The minimum down payment for properties under $500,000 is 5% of the purchase price. For properties between $500,000 and $999,999, it is 5% on the first $500,000 plus 10% on the remainder. Over $1 million requires a minimum 20% down payment.

What credit score is needed for a BMO mortgage?

BMO generally requires a minimum credit score of 600 for mortgage approval. Those with scores below 600 may need to consider alternative lenders. The higher your score, the better rate you can qualify for.

Can I get a pre-approval for a BMO mortgage online?

Yes, BMO allows you to complete the entire mortgage pre-approval process online by submitting your financial information through their website. You can also meet with a mortgage specialist in person.

Does BMO offer mortgages for investment properties?

Yes, BMO provides mortgages for rental properties and investment properties. You will need a minimum 20% down payment on investment properties financed through BMO.

What term lengths are available for BMO mortgages?

BMO offers mortgage terms ranging from 6 months to 10 years. The most common terms are 1-year, 3-year, 5-year, and 10-year fixed-rate mortgages.

Can I break my BMO mortgage contract early?

You can prepay a certain amount annually without penalty if you have a closed fixed rate mortgage. To fully break the contract early, you will pay a prepayment charge depending on your mortgage type. An open mortgage allows prepayment anytime without penalty.

Does BMO offer mortgages for new immigrants?

Yes, BMO offers mortgage options tailored to newcomers to Canada with alternative credit history documentation. Their multilingual mortgage specialists can also assist in multiple languages.

What mortgage insurance options does BMO offer?

BMO offers optional mortgage life, critical illness, disability, and job loss insurance to cover payments in case you cannot work or pass away.

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