A mortgage is an important subject for every homeowner or potential homeowner. Getting a mortgage for your house can be one of the biggest financial decisions you will make, and it is necessary to have the right information needed to make the best choice when it comes to what mortgage type to choose. Different mortgage rates and terms depend on the type of house you want to acquire and your credit score.
If you are a newbie planning to get your first home through a mortgage, relax; the journey is exciting, and this post will also guide you in understanding how a mortgage works and how to get the best mortgage rates possible. In simple terms, a mortgage is a repayable loan that you can get from the bank or a broker to purchase a home; most times, the loan is often secured by collateral and paid back monthly. In Canada, you must make a down payment on your property to qualify for a mortgage.
Best Mortgage Online has highlighted the mortgage rates available in Canada for 2022 and how to ensure you get the best mortgage rates for your home financing.
Mortgage Rates in Canada
The current mortgage rates in Canada have experienced a significant reduction since the period of the COVID-19 era in 2020 and parts of 2021. Although there are experts’ projections that the mortgage rates will increase before the end of 2022, the increase will still be low or at par compared to what we had before COVID. If you plan to get a house, this might be your best chance of getting the best mortgage rates.
A mortgage rate is determined by the terms agreed upon by the lender. The term means the period where factors like interest rates and payment frequency of the mortgage are in effect. There are differences in the rates that apply depending on the type of lender and the duration of payment. Although mortgage terms are flexible, Canada’s most common term is five years. The mortgage rule is that the lower the number of years, the lower the rate applicable.
Fixed vs Variable Rates
The fixed vs variable mortgage rate is one of a home buyer’s major decisions. A wrong choice can cost you thousands of dollars or save you thousands of dollars if you make a favorable choice. To get the best mortgage rates in Canada, you need to choose between fixed or variable rates. It depends on the type of house you want to mortgage and the duration you propose for completing the payment. Here are the significant differences between fixed and variable rates:
Fixed rates:
- The interest rates on a fixed mortgage remain unchanged for the entire duration of the mortgage term
- The rate of a fixed mortgage can be typically high, but it provides a stable repayment plan and amount
- Breaking the mortgage attracts a high penalty called Interest Rate Differential Penalty
Variable rates:
- The interest rates on variable mortgages are not fixed and can go lower or higher depending on the current market rate set by the Bank of Canada
- The initial rate of a variable mortgage is often lower than that of a fixed, but the rate can also be higher at a certain period.
- The penalty for breaking the variable mortgage is far lower, and you can switch to a fixed rate at any time without breaking the mortgage.
We have put together some of the mortgage rates provided by top lenders in Canada:
| Lender | Fixed Mortgage | Variable Mortgage | Duration |
| Nesto | 3.44% | 1.20% | 5-year |
| Tangerine | 3.54% | 1.37% | 5-year |
| Laurentian Bank | 3.54% | 2.45% | 5-year |
| TD Bank | 4.59% | 2.60% | 5-year |
| Desjardins Group | 4.74% | 2.45% | 5-year |
| HSBC | 4.74% | 2.65% | 5-year |
| BMO | 4.79% | 2.45% | 5-year |
| CIBC | 4.79% | 2.45% | 5-year |
| Home Trust Company | 4.79% | 2.45% | 5-year |
| National Bank of Canada | 4.79% | 2.45% | 5-year |
| Royal Bank of Canada | 4.79% | 2.45% | 5-year |
| Banque Scotia | 4.79% | 2.65% | 5-year |
How to Get the Lowest Mortgage Rates in 2022
For most individuals, the variable rate is always the best choice due to the many advantages compared to fixed rates. Here are some reasons why variable mortgages might be the best way to get the lowest mortgage rates in 2022.
- Variable has historically cost less than fixed-rate: The expert report provides that in 90% of most cases, a variable mortgage always has a lower rate than a fixed mortgage. The common fear about variable rates is that they can also increase when the market price surges, but history has proven to us that this rarely occurs. You can save more money by going for a variable mortgage.
- Effect of COVID–19 on mortgage rate: Despite the health challenges that have occurred because of the pandemic, it has a different effect on the mortgage rate. The pandemic has greatly impacted the economy, and one of the mechanisms of the government to stimulate the economy is to control the interest rates through the Central Bank of Canada. From all indications, the rates will still be kept relatively low in 2022 to continue stimulation.
Comparing Mortgage Rates
Another way of getting the lowest mortgage rates even after selecting a variable mortgage is to compare different mortgage rates. Different lenders offer mortgage services and offer different rates for their services. It is often recommended to compare the different lenders’ rates and select the lowest one with great options.
When comparing mortgage rates across lenders might be tricky for first-time home buyers. The first thing to do is compare the annual percentage rates and not just the interest rates. The annual percentage rates are more comprehensive and include interest rates, fees and other associated costs. A lender might have a low-interest rate but a higher annual percentage rate cumulatively. Calculating the total rates will make your choice of lender much easier.
Conclusion
Mortgages are highly important when it comes to home buying. It is even more important to understand how a mortgage works if you try to save costs. There are commonly two forms of mortgage with different rates. One of the best forms of mortgage rates in Canada is the variable mortgage; it has lower interest rates and allows you to save more money than the fixed rate.
The variable rate is even more advantageous in 2022 since the market has an even lower rate due to the impact of COVID-19 on the mortgage rate. To effectively save cost when it comes to home buying, you can compare the rates offered by different lenders and select the one most appropriate.
Best Mortgage Online is focused on helping residents of Canada to acquire homes with the best mortgage rates. For more information, you can check https://bestmortgageonline.ca/.