When doing a mortgage rate comparison these are a few things to keep in mind. Current interest rates are low due in large part to the housing crisis in the 1980s. They run from 2.79% for a 1-year mortgage to 3.79% for 10 years. Your rate is decided by taking into consideration the loan amount, the down payment, and the number of years you chose to pay it off. The larger the down payment, the less mortgage you need. The higher the number of payment years, the higher the interest rates will be. Banks often give their existing customers a lower rate. Mortgage insurance is reflected in the rate and also decreases with the higher down payment. Interest rates are affected by various economic factors, including inflation and the housing market. Rates may vary from lender to lender in different locations throughout Canada. Some interest payments are tax deductible.
Mortgages are used to finance a new home, update or renovate an existing home, or consolidate debt. They are complicated, and every situation is unique. The buyer needs to be knowledgeable and work with a professional who will guide him or her through the process of completing a home mortgage comparison and help choose the mortgage that best meets the buyer’s needs. These are some of the options you should compare:
- Fixed-rate mortgage works for people who need to know what their payments will be each month. The interest rate is fixed at the start of the mortgage and will never change.
- Adjustable-rate mortgage has flexible interest. Payments vary according to the prime rate, which is currently 3%, and are more complex than the fixed-rate.
- Equity mortgage is for the homeowner who already has a first mortgage. The equity mortgage is based on the value of the home rather than income and credit.
- Open mortgage allows for paying off the mortgage at any time with no penalty but comes at a higher interest rate than other mortgages.
- Closed mortgage will have a lower interest rate but limits payments to the agreed upon contract. Paying off more than the agreed amount will result in a penalty of additional interest.
- Reverse mortgage provides income based on existing home equity and is available to people 55 years of age and older. This is a great vehicle for someone who cannot afford to maintain their home or needs cash flow, but it comes at a higher interest rate than other mortgages.
Lenders usually offer a mortgage calculator on their website which will help with a mortgage interest rate comparison. Enter the amount you want to borrow, the interest rate, and the number of years the loan will last, and the calculator will figure your monthly payments. This is a great tool to help you plan for your purchase and complete a comprehensive mortgage rate comparison. Be sure not to forget about the closing costs— which include home inspection, attorney fees, title search, and administrative fees —on your purchase. Closing fees are generally not included in the mortgage but come out of pocket instead. While the mortgage process is complex and can be stressful, it is worth the work to do a mortgage interest rate comparison.