For most Canadians, shopping around for a mortgage is something that happens once every five years. This is the time to figure out if you can get a better mortgage rate, and lock in something new for another five years. But if you want to get the best possible mortgage rate, whether you are renewing, refinancing or buying a home, you will have to do a little legwork.
First Things First: What’s Your Financial Situation?
Before you start shopping around for a mortgage rate, you will need know your own financial situation. Get a good handle on the following aspects of your finances before you start shopping around:
You should also have a general idea of what you can afford in a home, as well as how much you are planning to borrow. This will give you basic information that banks and mortgage brokers can use as they prepare a quote for you.
Before you start looking for a good mortgage rate, you need to make sure you are in a position to afford your mortgage. With a renewal or refinance, it is a little bit easier to know what you can afford — you are already making a payments! If you are buying a home, though, you will need to consider the costs of home ownership, and recognize that a home comes with costs beyond the mortgage. Make sure that you can afford the mortgage plus the added expenses that you will see. There are many online calculators that can give you an idea of what what kind of mortgage you can afford.
Shopping Around for the Best Mortgage Interest Rate
Once you know your financial situation, and once you have a pretty good idea of what you can afford, it is time to start shopping around. Be sure to familiarize yourself with the different mortgage options available, and get a general idea of the mortgage product that is most likely to benefit your individual situation. Then, once you have an idea of what you are looking for, it’s time to shop around.
You might want to start at your bank, and then compare what your bank is offering to what is being offered by other banks, and by what a mortgage broker is likely to get you. Make sure you get all offers in writing. Let banks and brokers know the basics of your situation, without filling out a full mortgage application. Instead, treat each lender or broker you speak with as if you are interviewing him or her. Find out how knowledgeable each is about mortgage products and services, and find out what sort of rate is available to you. You can try to ask for the best rate in some cases, although you may have to use the posted rate as a starting point for negotiating down.
Be sure you are comparing apples to apples throughout the process, and make sure that banks and brokers know that you are shopping around. You want them to offer their best possible mortgage rate, and you want to be able to make meaningful comparisons between that rate and what is being offered elsewhere.
In the end, what is offered to you will depend on your financial and credit situation, as well as market rates. But, by shopping around you can figure out what would work best for you.