Better Mortgage Rates

GETTING THE BEST DEAL
The competition among mortgage lenders for business has resulted in rate discounting and other incentive offerings to attract clients. In many cases different lenders will offer different incentives, some may be offering cash back based on your mortgage amount, some may offer better interest rates, and some may offer to pick up some of your closing costs such as legal or home inspection fees. To find the best deal take the time to shop around.

In order to compare the alternative incentives of each mortgage lender, calculate the beneficial financing of discounted interest rate offers and compare this with the value of cash offers or other incentives. Use the Canada Mortgage Beneficial Financing Calculator.

Assume a mortgage of $100,000.

Lender A is willing to offer 3/4 of a percent off the current posted interest rate of 8%

Lender B is willing to offer cash back of 1.5% of your mortgage amount, a 3 year term is required.

Lender C is willing to offer 1/4 of a percent off the 8% interest rate and will also pay $800 towards legal, appraisal, and inspection fees.

The present value benefit of a 7.25% mortgage rate versus an 8% mortgage rate is $1,895. This is the savings in the mortgage payment and reduced balance at term end. Similarly, the 1/4 percent reduction from Lender C results in savings of $632, plus the $800 contribution to costs. The cash back offer results in $1,500 in your pocket to spend on closing costs or otherwise.

The clear winner from a financial perspective is Lender A with the 7.25% mortgage rate. However, for first time buyers with little savings or down payment the advantage of receiving cash back to help with the seemingly endless closing costs may be a perfect fit. Incentives are not the only issue. A knowledgeable mortgage lender can help you successfully navigate the purchase and finance process. A flexible mortgage product can offer the potential for substantial savings by allowing pre payments of principal, early renewals or open options. See the Canada Mortgage Survey for information on posted mortgage rates and mortgage products.