The Best Mortgage Rates in Canada (2021)

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by Enoch Omololu

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The best mortgage rate available at the time of your home purchase can save you tens of thousands of dollars.

Even just a little variance in interest rates can mean a huge difference in how much money you spend on your monthly mortgage payments.

And, this means that the extra effort you put into comparing rates across lenders to find a good deal is worth it.

Read on to find out how to go about finding the best mortgage rates available in Canada.

Related: Home Buyer’s Guide for Canadians

Best Mortgage Rates in Canada

Here are the three options for finding the best available mortgage rates in Canada.

1. Use a Mortgage Broker

As I mentioned earlier, a mortgage broker works with multiple lenders and financial institutions including banks, trust companies, credit unions, and more to get you a low rate.

Instead of shopping around for the best rates yourself and having multiple credit checks that ding your credit score, a mortgage broker can use one credit check to give you access to various lenders.

Mortgage brokers offer you free service (they are compensated by lenders) and they assist you with your application.

A mortgage broker I recommend is Intellimortgage.

Intellimortgage Rates

Why use Intellimortgage?

  • Best rate guarantee: They provide you with a guarantee that your rate will be the lowest in Canada and if you find a lower rate elsewhere, they will match it or pay you $500.
  • After-approval rate guarantee: If mortgage rates fall after you have been approved (by 0.1% or more), you can switch lenders at no cost.
  • Varied lender options: Intellimortgage has access to more than 350 advertised mortgage rates.
  • Closing date guarantee: Your mortgage financing is guaranteed to close on schedule or they will pay you $500 in cash.
  • Convenient application: They handle all the paperwork so you don’t have to worry.
  • No surprise fees: Intellimortgage will not charge you any fees. They are paid by lenders and redirect two-thirds of this fee back to you in lower rates and cash rebates.

Read my complete Intellimortgage review.

2. Use a Bank

Yes, you may find the best mortgage rate at a bank, especially if it’s an online bank. Banks sometimes post promotional rates that beat the competition. However, these are often short-lived.

Digital banks aka online or virtual banks are able to offer better rates than brick-and-mortar banks because they spend less on overhead costs and pass on some of these savings to customers in high-interest savings and low mortgage rates.

One popular online bank with great mortgage rates is Tangerine. Check Tangerine mortgage rates or read our detailed review.

3. Use an Online Mortgage Site Like Homewise

A digital online mortgage site like Homewise simplifies the mortgage process. Pre-approvals are seamless and you enjoy free assistance from mortgage experts up until you close on your mortgage.

Homewise Mortgage Rates

Homewise works with over 30 popular lenders to find you some of the best mortgage rates or home equity loan rates. The application process takes about 5 minutes to complete and they negotiate with lenders on your behalf.

The company is licensed as a mortgage broker in Ontario, British Columbia, Manitoba, and Alberta. It can also broker mortgages in Saskatchewan, Newfoundland and Labrador, Nova Scotia, and New Brunswick.

Read this Homewise review for more information.

Credit Unions

If you already bank with a credit union, check what their mortgage rates are. Compare that rate with what’s available elsewhere.

Canada Mortgage FAQs

Before you start searching for a competitive mortgage rate, you need to be familiar with some of the terminologies that will come up. It’s important to understand these basic terms so you can choose the right mortgage for you.

What is a mortgage?

A mortgage is a type of loan you apply for in order to buy a home.

The house serves as collateral and you are required to make periodic payments back to a mortgage lender until you pay off your entire mortgage loan.

Amortization vs Mortgage Term

The amortization period refers to the number of years it will take to pay off your mortgage loan in full. A typical mortgage in Canada has a 25-year amortization period.

On the other hand, a mortgage term refers to the length of time you are locked in with a lender and are bound by their terms and conditions i.e. interest rates, prepayment terms, and penalties, etc.

The most common mortgage term in Canada is the 5-year fixed rate.

Variable vs Fixed Mortgage Rate

A fixed mortgage rate is one that stays the same throughout the mortgage term. For example, a 3% 5-year fixed-rate mortgage means that you will pay an interest rate of 3% for 5 years and it won’t change.

A variable mortgage rate varies depending on the prime rate which your lender sets based on the prevailing lending interest rate set by the Bank of Canada.

What this means is that when the prime rate (benchmark rate) goes up, your mortgage rate rises; if the prime rate falls, your mortgage rate drops.

A fixed rate offers certainty to homeowners and is the most popular type of mortgage. The stability you get often comes at a premium.

A variable rate can fluctuate during your mortgage term. However, you can save money when the rates are lower. The difference between variable-rate and fixed-rate mortgages has narrowed in recent years.

best mortgage rates canada

Mortgage Broker vs Bank

Mortgage brokers are specialists who have a connection with multiple lenders. They can help you find the best rates you qualify for and assist you in the application process. Mortgage brokers often have access to mortgage loan offers that are not available publicly.

Banks offer you their own mortgage products and rates which may not be competitive.

Open vs Closed Mortgage

An open mortgage gives you the flexibility to pay off your entire mortgage balance at any time without penalty. This flexibility comes at a premium.

A closed mortgage (most common) restricts you to the agreed mortgage and prepayment terms. You are penalized if you back out of your contract and pay off your mortgage balance before the end of your mortgage term.

Most closed mortgages allow you some flexibility in increasing your mortgage payments or putting down a limited lump sum.

Conventional Mortgage vs High-Ratio Mortgage

A conventional mortgage (aka low-ratio mortgage) is one in which the home buyer has a down payment that is 20% or more of the home’s purchase price.

Essentially, for a conventional mortgage, the mortgage loan is not more than 80% of the purchase price of the property. Conventional mortgages are required to be insured by the Canada Mortgage and Housing Corporation (CMHC).

When your down payment is less than 20% of the property’s appraised value, it’s known as a high-ratio mortgage by CMHC and you are required to obtain mortgage default insurance.

Related Posts

How Much Money Can You Save?

How much money can you save when you shop around for lower mortgage rates?

Here’s an example.

Mortgage Savings Rate Calculation

Using the rates posted as of today (January 26, 2021):

  • Lowest mortgage rates posted on Intellimortgage: 1.34% 5-year fixed.
  • Lowest rate posted by a Big Five bank: 1.84% 5-year fixed.
  • The difference in mortgage rates: 0.50%

On a $400,000 mortgage loan, you will pay:

  • $1,569 monthly (@ 1.84%), or
  • $1,663 monthly (@ 1.84%)
  • Difference in monthly mortgage payments: $1,663 – $1,569 = $94
  • Savings in year one: $1,128
  • Savings during the 5-year term: $5,640

Bottom line: The best mortgage rates at the time of your home purchase can save you a lot of money.

The Best Mortgage Rates in Canada (2021)
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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, Credit Canada, MSN Money, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

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