On the hunt for a budget-friendly mortgage? You’ve just struck gold. Welcome to Canada’s most comprehensive guide on mortgage rates, designed to help you secure top-tier pricing from mainstream lenders and rate aggregators—provided their rates are up to standard.
Having access to a broad selection of reputable lenders significantly improves your chances of landing the best mortgage deal. But finding the lowest rate isn’t the end of the journey. If you want to minimize your total borrowing costs, you need to understand the key factors influencing mortgage pricing and how to negotiate effectively.
Below, we’ll walk you through the ultimate playbook for securing the lowest overall borrowing costs in Canada.
How to Qualify for the Lowest Mortgage Rates
Mortgage Insurance and Its Impact on Rates
The lowest mortgage rates typically require default insurance. Why? Because mortgage insurance acts as a safety net for lenders, reducing their risk and allowing them to offer better pricing.
Most new mortgages with less than a 20% down payment require insurance by law. While it might seem counterintuitive that putting less money down leads to lower rates, insured mortgages actually lower costs and risks for lenders compared to uninsured financing.
Quick tip: If you switch lenders at maturity without increasing your loan amount or amortization, ensure the new lender keeps your insurance in force—this can help you qualify for lower rates today and in the future.
Insurable Mortgages: The Next Best Option
Besides borrower-paid default insurance, lender-paid insured mortgages—also known as "insurable" mortgages—offer another way to secure lower rates. Insurable rates apply to conventional mortgages that meet the following criteria:
At least 20% equity
Amortization of 25 years or less
An owner-occupied home purchased for under $1 million
Insurable mortgages often come with rates that are 10–25 basis points (bps) lower than uninsured rates. (One basis point = 0.01% or 1/100th of a per cent.)
Quick tip: A 10 bps rate savings can keep over $470 in your pocket over five years for every $100,000 borrowed with a 25-year amortization.
Key Requirements for the Best Prime Mortgage Rates
To qualify for the best mortgage rates in Canada, you’ll typically need:
A credit score of 720+ (some lenders allow lower scores, but 720+ is a solid benchmark)
A clean credit report (no recent missed payments or derogatory marks)
Monthly housing costs below 39% of gross income (including mortgage payments, property taxes, heating, and half of condo fees, if applicable)
Total monthly debt load under 44% of gross income (including housing costs, loans, alimony, child support, and 3% of any credit card balances)
Provable income (via job letter, pay stubs, or tax documentation for self-employed borrowers)
A closing date within the lender’s rate hold period (some of the best rates require closing within 30 days)
A marketable home (rural or unconventional properties may not qualify for the lowest rates)
Quick tip: The government’s mortgage stress test often determines approval rates. As of November 21, 2024, the stress test no longer applies when switching lenders, provided the loan amount and amortization remain the same.
Understanding Rate Surcharges
If you’re a non-prime borrower, be prepared to pay significantly higher rates. Non-prime borrowers include those with:
Bad or no credit history
Hard-to-prove income
High debt ratios
Offshore residency
Unconventional properties
These factors can add 100–200 bps or more to your rate, plus additional lender and/or broker fees (typically 1%+ of the mortgage amount). Here are some common rate surcharges:
Amortizations over 25 years (if uninsured): +10 bps
Amortizations over 30 years (if uninsured): +100 bps or more, plus lender fees
Non-owner occupied rental properties: +10–25 bps
Vacation homes: +10–25 bps
Pre-approvals: +0–25 bps (most pre-approvals don’t close, so lenders charge extra to offset costs)
Quick tip: Only non-prime lenders offer amortizations over 30 years. If you need long-term flexibility, consider a home equity line of credit (HELOC)—its interest-only payments have an indefinite amortization.
How to Negotiate the Best Mortgage Rate
Securing the best mortgage rate takes strategy. Here’s your eight-step survival guide for mortgage negotiations:
Confirm whether you qualify for prime rates using the checklist above.
Decide on the best mortgage term (seek professional advice if needed).
Determine your mortgage type: Insured, insurable, or uninsurable.
Shortlist promising rates and call lenders to assess their terms.
Consult an experienced mortgage broker to see if they can beat those rates.
Ensure the lender’s terms match your five-year financial plan.
Compare the overall cost of different options beyond just the rate.
Apply and lock in your rate to protect against potential rate increases.
Quick tip: High-volume brokers often get better pricing from lenders. Choose a full-time broker who’s closed $10M–$25M in mortgages over the past year.
Key Mortgage Features That Matter More Than the Rate
The lowest rate isn’t always the best deal. Flexible mortgage terms can save you thousands down the line. Here are some key features to look for:
1. Portability
If you might move before your mortgage matures, ensure your loan is portable—this lets you transfer it to a new home without penalties.
2. Mid-Term Refinancing
If you might need to borrow more later, ensure your lender allows mid-term refinances without hefty penalties.
3. Prepayment Privileges
If you plan to make extra payments, check for flexible prepayment options. Some mortgages allow 10–30% annual prepayments, while low-frills mortgages may restrict you.
4. Fair Prepayment Penalties
If you need to break your mortgage early, penalties can vary widely. Big Six banks often use higher penalties than fair-lending institutions.
5. Rate Drop Policies
Some lenders let you reset your rate if market rates drop before closing. Others don’t offer this feature.
6. Bridge Financing
If you’re buying a new home before selling your old one, check if your lender offers cost-effective bridge loans.
7. Cash Rebates
Some banks offer cashback incentives (sometimes over $4,000), which can reduce your borrowing costs—but they may claw this back if you break the mortgage early.
Final Thoughts: Ask These 7 Questions Before Locking In Your Mortgage
Can you buy down my rate further?
How long is my rate guarantee?
What are the prepayment terms and penalties?
How is the interest compounded?
Are there reinvestment fees if I break the mortgage early?
What’s your rate drop policy if rates fall before closing?
Do you cover all legal and appraisal fees when switching lenders?
A well-negotiated mortgage can save you thousands over its term. By understanding mortgage pricing, qualification requirements, and key lender terms, you can confidently navigate the mortgage landscape and secure the best deal possible.
