Condensed version of this post:
- Insured mortgages (or with less than 20% down) are getting the best rate offers!
- Uninsured mortgages (20% down or more) get a slightly higher rate
- Rental purchases receive even higher rates
The Whole Story
So what is your best rate? I get this question asked daily….Several time a day actually. Not surprising though, mortgages are what I do and rates are very important to my clients.
Just over 6 months ago, it would have been quite easy to answer this question. These days, after the new mortgage rules got introduced, the answer is more in lines of “it depends on what kind of mortgage it is”.
Let me explain…Insured Mortgages aka high-ratio mortgages or mortgage with less than 20% down enjoy the lowest rate offers these days. This applies to both fixed rates and variable rates. Banks love insured mortgages! Insurance gives them extra security in case of default. Banks’ main competitors like First National, MCAP and other AAA mortgage trust companies love insured mortgages even more. They insure all the mortgages and sometimes even pay the premium out of their own pocket where the down payment is over 20% just to have the mortgage insured. If your mortgage is coming up for a renewal and it was originally insured, you will get the lowest rate offer with your lender (hopefully!) or another lender. This applies even if you now have more than 20% of equity in the property. If your mortgage insured originally, it is insured until it is paid in full.
Here is the ironic thing: if you are putting 20% down or more and your mortgage is not insured, you will not have access to those nice high-ratio rates. Imagine a middle-aged couple with good long job stability, excellent credit looking to buy a house with some substantial savings are being offered a higher rate than their 22 yr old son buying his first apartment with only 5% down? Ironic, indeed.
For example, Scotiabank is offering 2.54% on the 5 yr fixed insured mortgage and 2.64% on their uninsured mortgages.
Mortgage on rental properties seem to have the highest rates. The same major bank is offering 2.94% on their 5 yr fixed term.
I think we will see a lot of interesting changes in the mortgage market coming up since the new rules have been introduced. I see a tendency among AAA trust companies adjusting to the changes to stay competitive. For instance, MCAP, one of the major AAA mortgage trust companies, has just recently announced their program for “insurable” purchases with 20% down or more where they offer an extremely low 5 yr fixed rate or 2.39%. To offer this rate, MCAP charges a 1% government related fee to off-set the cost of mortgage insurance.
NOTE: This program is available only to a very small number of top mortgage brokerages. And guess what? I have access to this program and can offer it to you!
If your mortgage is coming up or you would like some more information, please get a hold of me and I would be more than happy to help you out!