How to Find the Best Mortgage Deal in Canada?

Buying your first dream home can be scary and exciting at the same time. You will soon break free from the shackles of rent and start making regular mortgage payments on the land/property that you actually own. And to help you find the best mortgage deal for your future home, we've created a quick guide to everything you need to know about mortgages in Canada. You can also check out Breezeful for the best mortgage advice on the market.

Understand the different mortgages

In Canada, mortgages fall into three categories: secured, conventional, and unsecured. Each of these mortgages comes with a different rate and set of benefits, so it's important to know the difference between the three before applying. A secured mortgage requires you to pay mortgage default insurance to protect the entity that is lending you money. Since the lenders are insured, these mortgages tend to have lower interest rates, although you should be aware that you will pay for the insurance along with your monthly mortgage payments.

A conventional mortgage is one that requires at least a 20% down payment. When you do this, you are not obligated to pay for mortgage insurance, which can save you some money down the road. But since the lenders are not insured with these mortgages, the interest rates tend to be higher. Lastly, unsecured mortgages are the riskiest for lenders. These loans do not meet government standards for insurance and are generally reserved for homes exceeding $ 30 million or mortgage terms of 30 years. Since this type of mortgage is the riskiest option for lenders, they tend to have the highest interest rates.

Tips for getting the best mortgage deal

When applying for a mortgage, lenders will view some of your personal information to determine if you may qualify for a mortgage. If the lender thinks you are a lower-risk borrower, you may be able to get a mortgage with better interest rates.

Save for a down payment

One of the best ways to secure a better mortgage deal is by saving for a larger down payment. The main reason we recommend saving for a larger down payment is that it allows you to borrow less money upfront. And when you borrow less money, you pay less interest, saving you a lot of money in the long run. Required down payments in Canada vary based on the price of the house, but for houses under $ 500,000, you must pay at least a 5% down payment. However, to guarantee the best interest rate, a 20% down payment is recommended.

Improve your credit score

Your credit score is very important to lenders in determining whether or not you qualify for a home loan. Credit scores in Canada range from 300 to 900, with the lowest category being poor and the highest being excellent. The better your credit score, the less risky it is for a borrower in the eyes of the lender. You can improve your credit score by paying off your debts, paying bills on time, and not applying for new credit cards while trying to get a mortgage.

Stabilize your income

A stable income is a great indicator to lenders that you can afford your monthly mortgage payment. If you work in a company with a fixed monthly or weekly salary, you will generally not face any problems. However, if you are self-employed, you may need a little more proof that you can afford the long-term monthly mortgage payments. Lenders can usually ask for your income dating back a few years to qualify you for a home loan.

Conclusion

Borrowing money for your new home through a mortgage loan is a great way to start your journey up the home ownership ladder. Generally speaking, if you have a full-time job, most lenders will consider your circumstances and qualify you for a mortgage. Before you go ahead and apply for a mortgage, make sure your credit score is at the standard level, that you have a stable income, and a down payment of between five and twenty percent.