Ever wonder how your mortgage rate is determined? What factors make it jump from percentage to percentage? We are getting down to the nitty gritty today and giving you the facts on what impacts mortgage rates.

What affects a Mortgage Rate?

There are 10 factors that affect a mortgage rate:

1. Location
Depending on which province your home is located in, this will have an overall effect on your mortgage rate. Generally speaking, provinces with more competitive markets will have lower rates.

2. Rate Hold
A rate hold is a guarantee on a rate for 90-120 days. If your closing dates do not fall within this timeframe, then your hold will be re-assessed. If your rate hold is re-assessed and the lender’s rates at that time of re-assessment are higher than your initial rate, then your rates will go up accordingly. We always follow up with all of our clients on a regular basis to avoid this situation whenever possible!

3. Refinancing
Movement on your mortgage of any form can affect your rate typically when you are working with your existing lender. New buyers will have lower rates than refinances, but refinances will have lower rates than mortgage transfers. Mortgage Brokers can access multiple lenders to find the most suitable product for their client’s unique needs.

4. Home Type
Lender’s assess the risk associated with your home type. Some properties are viewed as higher risk than others. If the subject property is considered higher risk, the lender may require higher rates.

5. Income Property/ Vacation Home
As previously mentioned, lenders assess the risk on your property. If you are buying an income property or a vacation home than the lender can assess at a higher risk and a higher rate may apply. This is one of the major benefits to having a mortgage broker on your team! They have access to a variety of lenders that can offer you a rate lower than others as they can compare a large variety.

6. Credit Score
We have talked a lot about credit on our blog, and there is a reason for that. Your credit score is a large determining factor for your rate. Lenders want to see that you have a history of managing your credit well and that you will be able to pay back the lender overtime. For more information on fixing your credit, check out our free e-book, Credit Medic.

7. Insured or uninsured
With the changes that the federal government made back in October 2016 this has had a significant impact on mortgage rates if your mortgage is insured or not. Read our Change of Space guide to find out the full impact of these changes.

8. Fixed/Variable Rate
The type of rate you are wanting to get will also affect your rate. Fixed rates are based on the bond market and variable rates are based on the Bank of Canada (economy).

9. Loan to Value (LVT)
The higher the Loan to Value the higher the risk. You can have someone who has a $1 million mortgage but has $2 million in equity in that property and they would be viewed as a lower risk than someone who has a $200,000 mortgage and their property is only worth $220,000. To boot with the federal changes, the person with the higher risk mortgage (insured) is likely to get a more competitive interest rate than the client with $2 million in equity.

10. Income level
The final part in this rather large equation is your income level. Although this does not necessarily impact the rate itself, it does impact your purchasing power and the amount you are able to put down on a home. Essentially indirectly impacting the rate.

Each of these factors plays a factor in the rate you will be able to get through a lender. The easiest way to get the lowest rate is to work with a dedicated mortgage professional. They will put together a fail-proof plan to get you the sharpest rate. They also have access to a variety of lenders which saves you the time and trouble of shopping for your mortgage on your own. As a final point, mortgage brokers can also assess your unique situation and find the right mortgage for you. Their goal is to see you successfully find and afford the home of your dreams and set you up for future success.

As we truck along in 2017, Mortgage Brokers and Lenders are adjusting to the new risk based mortgage rate pricing that came into play after the Finance Minister changed Government backed mortgage default insurance regulations in late 2016.

Lenders often choose to pay for mortgage default insurance on mortgages where the borrower was not required to pay it themselves. This method protects a lenders book of business against credit loss, helps them package more secured mortgages together to sell to investors and reduces the amount of capital they are required to maintain. This method in the mortgage industry is called back-end insuring.

The changes have limited the mortgage profiles that lenders are allowed to insure using Government backed insurers. Essentially the Government is intentionally passing on the risk to Lenders by implementing stricter insurance qualifying guidelines and limiting mortgages that can be insured to what they consider lower risk “inside the box” mortgages.

The onus is now on the lender to absorb more costs if a borrower defaults. In the end costs are passed on to borrowers by lenders applying higher rates to less secured mortgages.

If you’re looking for a mortgage in today’s market your circumstances may not fit “inside the Box” and be an insurable mortgage profile and your mortgage rate may be higher. The following is a short list of what insurers have limited their guidelines to:

• 25 year maximum amortizations
• Must qualify by using a rate stress test
• Maximum Gross Debt Service Ratio (GDS) of 39% (shelter expenses)
• Maximum Total Debt Service Ratio (TDS )of 44% (all liabilities)
• No refinances
• No single unit rentals
• Purchase price must be less than $1 Million

As you can see the insurer’s list is limited making Dominion Lending Centre’s lender connections and mortgage solutions more important than ever! Our Mortgage Brokers have a vast amount of mortgage options available to cover “outside the box” uninsurable mortgage profiles. Whether your refinancing, you need an amortization over 25 years, want to buy a single-unit rental or more we have a mortgage for that!

Contact a DLC Mortgage Broker to get started on your mortgage approval today!
KATHLEEN DEDILUKE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/inside-outside-box-mortgages-todays-market/

Life can definitely throw some challenging financial situations your way. As mortgage professionals, we can provide solutions and strategies during or after these challenging times in order to get you back on track. We have access to banks, trust companies and mortgage companies that specialize in this transitional period to help you move forward with the best mortgage plan for you. We protect your credit by negotiating with multiple lenders to find a solution for you.

If you have never owned a home and have had a consumer proposal, the good news is that you are already accustomed to the discipline of saving money every month. Should you choose to continue to grow your savings, those funds can then be put toward a down payment and re-establishing credit.

If you own a home already, there are lenders that will help you refinance and pay out your proposal earlier in order to accelerate your transition period.

After bankruptcy, different lenders will issue mortgages based on the amount of time since you were discharged, the amount of down payment on a purchase and/or the current equity in your home if your already own. Lenders then price their rates based on these aspects of your application.

At Dominion Lending Centres, we look forward to learning about your journey while protecting your credit and guiding you through the best strategy on a moving forward basis.

ANGELA CALLA
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/getting-mortgage-consumer-proposal-bankruptcy/