In January 2019 over 4 million Canadians had mortgages. This is hardly surprising. Taking out a mortgage is one of the most popular ways to help you buy a home.
The average mortgage loan across Canada is around $300,000. This will take you a long way towards the cost of your dream home! And if you make more money you can get an even bigger mortgage.
But finding the right mortgage rates is extremely important. Choosing bad rates could leave you with a huge monthly mortgage bill. This will add financial pressure rather than helping you out in the long run.
Fortunately, Tangerine mortgage rates are some of the best around. Read on to find out more!
Everything You Need to Know About Mortgages
Right, let's get back to basics. A mortgage is a loan that you can take out to help you buy a property.
Mortgages work by making up the difference between the down payment on your home and total selling price. You usually take out a mortgage from a bank.
You then pay your mortgage back over a period of time. Another name for this is amortization. This period is often around 25 years, but it can be much longer or shorter.
Over this period you make monthly payments back to the bank. However, you also have to pay interest on your loan. This is the mortgage rate.
After a period of time, known as the 'mortgage term', you can renegotiate the terms of your mortgage. This might mean extending or shortening the amortization. Or you can even switch lenders or remortgage.
There are also two different types of mortgages to look at: open and closed mortgages.
A closed mortgage means you regularly pay a fixed amount over a period of time. In contrast, open mortgages allow you to pay bigger lump sums of money if you have them.
You always have to pay a monthly minimum with an open mortgage. But if you come into some money you can pay off a bigger chunk.
How Do Canadian Mortgage Rates Work?
Mortgage interest rates are how banks make money off mortgage loans. You pay back your loan with interest. And the mortgage rate determines how much interest you pay.
The mortgage rate depends on a few things.
Firstly, it will depend on where you get the mortgage from. Different banks will offer different deals. Finding the best mortgage in Canada could save you a lot of money!
Different types of mortgages also come with different mortgage rates. An open mortgage usually comes with higher interest rates than a closed one.
This is because you might be able to pay it off quicker. So the banks up the interest rates to make sure they make money.
This is also why your mortgage rate will depend on the length of your mortgage term. This is how long you have to pay your mortgage for being renegotiating.
A longer term, for example, 10 years, offers you predictability. But you pay a higher interest rate over this time for that predictability. This means you end up paying more over time.
Having a short term can be riskier. You might get a low-interest rate to start with. But then your lender can renegotiate and increase the rate once the term is up.
This is why banks offer lower interest rates on shorter terms to encourage people to take them.
There are also two different types of mortgage rates: fixed rates and variable rates. These are fairly straight forward.
A fixed rate means the mortgage rate remains the same throughout. So you know exactly what you're paying and when over time. But you often have to pay a premium for a fixed rate.
Variable rates can change with time. Often they're lower than the fixed rates. But it if the market changes they can sky-rocket.
Why Are Mortgage Rates Important?
Essentially, choosing the best mortgage rate could save you thousands of dollars. This is why it's important to find the best one.
It's often difficult to imagine how much a mortgage rate is worth. The percentages are usually less than 5%. And five is a small number right?
Well, yes but not when you're dealing with the amount of money a mortgage is worth.
For example, let's say you take out a $300,000 mortgage with a 4% interest rate. 4% of £300,000 is $12,000 dollars!
Suddenly that little number doesn't seem so little does it? You're actually starting to add huge amounts of money to your initial mortgage loan.
This is why it's important to try and keep the mortgage rate as low as possible. And it also explains why some people prefer to pay a premium to keep their mortgage on a fixed-rate. That way you can see exactly what you'll have to pay back over time.
What the Best Mortgage Rates in Canada Offer
What to look for slightly depends on how much of a risk you're willing to take with your mortgage.
Taking a shorter term often means significantly lower rates of interest. But this could come back to bite you when it comes to the end of the term. So a long term mortgage rate offers you more predictability.
This is a good place to start then. A long-term mortgage at a good rate is an ideal scenario. This is even better if the deal is a fixed rate.
When looking at variable rates, you need to look at the prime rate. This is currently 3.95% in Canada.
A variable mortgage will show you how far above or below the prime rate their rate is. For example, if their rate is 3.36% it's 0.59% below the prime rate.
Choosing a variable mortgage that is below the prime rate means that if the prime rate increases you still won't pay above it. Or if it drops you will be paying even less! It's a helpful way to spot a good deal.
So let's have a look at some of these great deals!
Tangerine Mortgage Rates
Tangerine mortgage rates are some of the best in Canada. In fact, on all but one type of mortgage, they are the best in Canada.