Are you thinking of buying a home, or is your mortgage renewal coming up? Looking around for mortgage rates can be confusing — and, of course, if you see a great rate, you want it.
Competitive rates are everywhere. But not all rates you see are of the same quality or purpose.
Rate comparison sites and big banks can have a different slant on advertised rates than, say, a top Canadian brokerage like True North Mortgage (whose salaried brokers offer unbiased advice and volume rate discounts).
Here's what you need to know about low rates, posted rates, and the actual rate you may get.
First, keep in mind the universal rate factors
When you see a low rate, it usually has the word ‘from’ in front. Consider it a 'range' rather than a singular number.
Despite the rate promoted, a lender may slot you into a slightly higher rate in the range due to certain universal qualifying factors (such as credit standing or mortgage type) that can predetermine the base rate offered, regardless of what’s advertised.
Next, the lowest rates always get the spotlight
Each client mortgage scenario is unique, and all the 'lowest' rates that could apply can't possibly be advertised.
So, due to competition between lenders and other 'mortgage' players (like rate-comparison sites), the most popular, lowest-priced, and most-sold mortgage products are typically the rates you see posted — which tend to be 5-year fixed rates aimed at good credit clients who want to apply for insured (high-ratio) mortgages.
Rate comparison sites: Real rates or just bait and switch?
Websites showcasing mortgage rate comparisons want to attract your attention and your clicks.
Their purpose isn’t (really) about saving you money. Their business model focuses on capturing your information to sell to third parties and to generate ‘lead’ income (paid by the lender advertising the rate) when you ‘click’ a rate and fill out a form.
If you are eventually connected to a broker (or lender), the rate you saw may not be ‘real,’ just bait to entice you — you can always check out the lender’s website to be sure.
Also, those ‘bait’ rates may come with restrictions, like a bona fide sale clause, a very large minimum mortgage size ($800K+), or hidden costs, like monthly interest compounding rather than semi-monthly.
The big banks: Posted rates and promotional (or special) rates
The major banks advertise their rates differently. They have higher posted rates and suggest you're getting a deal with their ‘promotional’ rates (cash rebates may also help sweeten the rate difference).
Their behemoth size and sluggish IT systems cost more to run, so they bank on repeat customers who look the other ‘rate’ way while paying slightly more to access their multi-product services.
Also, the difference between a big bank's posted rates and the special rate they offer for your mortgage can be used to charge higher IRD (interest rate differential) penalties if you break your term before your renewal date.
For example, let’s say the bank’s posted rate was 7.0%, and you got a 5-year mortgage rate of 5.0%. If you want to break your term and rates haven't changed, that discount of 2% will be factored into the penalty on your mortgage balance for your remaining term.
True North Mortgage: A service focus on ‘real’ rates
This top Canadian brokerage has been around for over 18 years. When they post a great rate, there's a good chance you can walk away with it. If you read through their substantial stack of 5-star reviews, their clients’ words seem to attest to it.
True North Mortgage CEO Dan Eisner discusses whether most clients can get the rates they post or advertise. “We purposely advertise rates that we feel a good portion of our mortgage applicants can get because that leads to happy clients,” he states.
He believes their range of low rates and volume discounts off many big bank and mortgage-lender rates helps clients get the best possible deal for their situation, saving them thousands compared to some other rate sources.
Dan explains further. “Our salaried mortgage brokerage model focuses on service, and lowered overhead costs compared to big banks mean we can put our clients’ savings first instead of relying on clicks or multi-product loyalty.”
And True North never sells your information to third parties.
“We’re obsessed with offering clients not only their best rate but also their best mortgage to go with it,” Dan offers. “That’s where the extra savings can really add up.”
Looking for a real deal? Check out the right rate source
True North certainly seems like the real deal. They excel at taking care of their clients’ mortgage needs while saving them a pile of cash — from the ‘rate’ beginning to the end of a stress-free experience.
They also make it easy to apply across Canada online, over the phone, or at one of their 11 stores.
Get expert advice from a highly trained broker in your preferred language. A few minutes online or in-store could save you money, time and stress. Contact Canada's No. 1 Mortgage Broker today.