I want the mortgage rate my neighbour was offered! That’s often a popular statement from mortgage borrowers – and you can replace the word ‘neighbour’ with a variety of other people to suit a specific scenario, but you get the point. The reality is that people qualify for different mortgage rates based on a wide variety of criteria lenders use to measure risk when loaning you money for a mortgage as well as specifics surrounding loan amounts and product offerings.
Knowing what factors work together to determine your mortgage rate can help you better understand the process. The rate you’re offered is based on a number of considerations that are unique to you, including:
- Loan Amount
- Credit History & Score
- Down Payment
- Debt-to-Income Ratio
- Mortgage Type (ie, fixed vs variable)
- Mortgage Term (eg, one-year, three-year, five-year…)
To ensure you qualify for the best possible rate, it’s important to make yourself as attractive as possible in the eyes of lenders. Ensure that your credit score is high, save as much as possible for a down payment and reduce your existing debt.
Mortgage selection is about more than rate
Although rate is important, your final mortgage decision shouldn’t be based on rate alone as there are many other equally important factors to consider that can impact the amount you pay on your mortgage over time. While lower rates generally signify lower payments, they can also translate to less flexibility. Pay special attention to prepayment privileges, penalties, portability and refinancing restrictions.
Since rates also vary by lender, it’s always in your best interest to work with your mortgage agent since I negotiate on your behalf with different types of lenders (banks, trust companies, credit unions, etc) to ensure you obtain the best possible mortgage product and competitive rate catered to your unique needs. With so many options, professional advice is invaluable.
It’s important to remember that everyone’s situation is different and not all mortgages are created equal. It’s, therefore, best to avoid making direct comparisons with other people. You never know for sure the details surrounding someone else’s finances and exactly why people qualify for different mortgage rates.
Have questions about securing the best mortgage product and rate to meet your needs? Answers are just a call or email away!