Navigating Mortgage Rates

Real estate in British Columbia is a hot commodity. Besides being one of the most desirable places to live in Canada, B.C. is one of the most expensive. For those who dream about a home on the west coast, a decent mortgage will go a long way in facilitating that.

Unlike ordinary interest rates, mortgage rates can become quite complicated. With rates based on terms like; Insured, insurable, and uninsurable, it can be challenging to decide which options best fit your mortgage needs now and in the future.

The Fundamentals of Mortgages

At their core, mortgages are a contract between a homebuyer and a lender. As with any agreement, these contracts come with terms and conditions for both the home buyer and the lender. This ‘not so simple’ contract outlines the requirements of what is likely the largest loan that you will ever take on.

Different types of mortgages provide coverage for different things. While some of these cover the overall home price alone, others might provide relief for other outstanding credits. When choosing the right mortgage for you, it is essential to consider the loan’s principal amount, the amortization period, and payment frequency. With all of these things in mind, potential buyers can make an informed decision based on their needs and ability.

Comparing Mortgage Rates in British Columbia

As with many things nationwide, mortgage rates in Canada will vary from province to province as lenders differ from region to region. What you may be able to secure in Saskatchewan can differ from the options in B.C.. This differentiation can play an important role, especially if you’re looking for a mortgage that is portable to another province.

When looking for the best possible rate, it is crucial to know where to “shop” with the best possible terms. When seeking out a mortgage, there are many options to choose from. It is possible to secure loans from banks, credit unions, mortgage-specific lenders (often called “Monoline lenders”), or other financing institutions. Rates are not the same across the board but vary depending on the borrower, as with credit history, type of employment, type of mortgage, or length of the term.

Depending on long-term plans, some borrowers might prefer a lower amortization period. The amortization period is the amount of time that it takes to pay off a mortgage in full. The longer that period is, the more interest you will pay over time. The shorter the amortization period, the higher the monthly payments, but you will pay less interest. If the initial down payment is less than 20%, the maximum amortization allowed is 25 years. If the down payment is more than 20%, you can get amortizations up to 30 years.

Mortgage Terms, Mortgage Types

Much like any other credit product, there are different types of agreements available. It is vital to do thorough research before deciding on which type of mortgage best suits your situation, and prospective buyers should consult with mortgage brokers, as well. As mortgage brokers deal with many lenders, they better understand the products available in the marketplace. What may be the best product at one institution may not be the best product on the market. Years of experience will help to break down the finer points of these contracts.

A mortgage term is the length of time a contract is in effect before renegotiation. These terms can last anywhere from months to 10 years, although most Canadians take five-year terms. At the end of each term, interest rates reset based on current rates, which can mean a fluctuation in your payments. Choosing a fixed rate option means that the interest rate on mortgage payments stays the same throughout the length of a term. Variable rates can increase or decrease over the course of your term depending on the “Prime Rate.”

A mortgage is more than your average loan or credit card. Purchasing a home is very likely the most significant purchase and investment most people make. Consulting a professional and discussing the various options for mortgages and interest rates can help to set these investments up for success.

Navigating Mortgage Rates