Sometimes you will notice that the mortgage rates online are less than the rate that we quoted. Rest assured, we can get rates that are better than what you find online.
Quick Summary
To qualify for the best rates, you need all of the following:
To be purchasing a property for less than $1,500,000
Be purchasing with less than 20% down.
Have qualified Credit
Have qualified income
Have a property that fits the CMHC guidelines. (CMHC will add a fee of about 4% to your mortgage!)
And, if you have time to read the rest here is a detailed explanation (In the simplest terms I can come up with)
There are three different rates for each mortgage, these are:
Insured mortgages – (Less than $1,500,000 with less than 20% down)
Insurable mortgages – (Less than $1,000,000 but with more than 20% down)
Uninsurable mortgage – (All other mortgages)
Insured Mortgages (The best rate)
Insured mortgages are for purchases less than $1,500,000 and with less than 20% down. In Canada, these mortgages are insured by either CMHC, Sagen or Canada Guarantee.
The cost for this insurance ranges from 2.5% to 4% of the mortgage amount. You (the purchaser) have to pay this insurance fee.
The fee gets added to your mortgage amount, which is paid out from part of your down payment. Because of this, it doesn’t feel like the money for the fee is coming out of your pocket, but it is coming out of your equity, and it is your money.
This is a giant cash cow for CMHC, Sagen and Canada Guarantee.
Banks have less risk if a mortgage is insured, so this is why you will get the best rate quote for a mortgage that is insured, but you will be paying up to 4% of the mortgage amount to get this rate.
Insurable Mortgages (The next best rate available)
These mortgages are also insured through CMHC, Sagen or Canada Guarantee and are for purchases less than $1,000,000 and with more than 20% down
In this case, CMHC, Sagen and Canada Guarantee charge less to insure these mortgages, and the banks pay this fee for you.
The banks do this because they like to bundle their mortgages up and sell them to the stock market at a profit. Then they take the money from the sale of the mortgages and put that money out into more mortgages. Rinse and repeat. (They also do this with Insured mortgages)
You will never know that your mortgage has been sold as the bank continues to administer the mortgage. The bank’s name is on the letters you get etc.
Uninsurable Mortgages (The next best rate after Insurable Mortgages)
These mortgages are for mortgages that don’t fit the guidelines of CMHC, Sagen or Canada Guarantee. (Think rentals or refinances etc.)
With these mortgages, the banks have to take 100% of the risk of the mortgage, and they have to use their own money to finance the mortgage (They can’t sell your mortgage to the stock market)
There is much more to it, but I have put it in the simplest terms possible.
