Why pay more interest than you have to?
If you’re looking to go through a conventional lender to buy a property in Alberta (and in Canada as a whole), you’re going to need to jump through three hoops: income verification, credit score and a down payment. Income verification shouldn’t be much of a problem if you’ve been working in the same profession (and hopefully with the same company) for an extended period of time and have a track record of income at the level that will allow you to make your house payments. As long as your housing expenses aren’t taking up more than 28% of your income, and your debt to income ratio is not over 42% inclusive of your mortgage, then that should be fine. Credit score is a reflection of your track record of making payments on your car note, your credit cards, your utilities and other obligations. If you pay your bills on time and have a credit history, your score should be in good shape as well. The down payment can be an obstacle for some, as conventional lenders usually want at least a 20% down payment in order to approve a loan for the rest. If you want to buy a $500,000 home, for example, you’ll need $100,000 in cash to put down, either from savings or from the sale of another property (you generally aren’t allowed to borrow the money that goes into your down payment).
If you have all of those ducks lined up, it’s time to take a look at interest rates. In Alberta, you have the choice between an open mortgage or a closed mortgage. If you choose a closed mortgage, you are deciding that you’re not going to be paying the loan off early because of the substantial prepayment penalty. An open mortgage allows you to pay the note off early without any penalty; however, the interest rate on an open mortgage is generally higher because the bank is risking losing that long term income. In Canada, mortgages are amortized over periods between 20 and 30 years, but the longest loan you can sign is a 10-year term. You have the chance to renew at the end of that period, but you’re going to be using the interest rates from that point in time at renewal.
To determine which type of loan is the best for your needs, call one of the mortgage professionals at Amansad Financial. We have the connections with all of the major lenders in Alberta, and we will find you the very best situation.
Interested in breaking into the Alberta real estate market? Whether you are interested in buying your first home or getting an investment property, mortgage rates remain at the Best Mortgage Rates Alberta has seen in quite some time. While prices are inching their way upward in many parts of the province, getting the loan remains as cost-effective as ever.
The lowest interest rates available out there come with closed variable mortgages. When a mortgage is closed, you can’t pay it off early without paying a significant penalty on the basis of interest rates. It’s possible to get a three-year closed variable mortgage at 2.45 percent (Prime – 0.55) and a five-year closed variable mortgage at 2.30 percent (Prime – 0.70). The difference between a closed fixed mortgage and closed variable mortgage is not that large, though. A three-year closed fixed mortgage is available at 2.49 percent, making it not really worth the risk of rates going up with the variable loan. The lowest interest rate on a five-year closed fixed loan is 2.84 percent, creating a bit more of a spread, so if you think you can pay off the mortgage quickly, that might be a deal worth considering. Closed fixed rate loans for one-year and two-year terms are available at 2.64 and 2.59 percent, respectively. In terms longer than five years, rates get significantly higher. At six years, the best rate jumps to 3.79 percent, and the highest available rate is the nine-year term, which is 5.12 percent. Rates drop a bit for a ten-year closed fixed mortgage, at 4.39 percent.
Open mortgage rates are higher, because the bank does not have the certainty of having the loan out there as long. With an open mortgage, you can pay the loan back early without any penalty. The lowest one year open fixed mortgage is 6.30 percent. For an open variable mortgage, a three year term is available for 4.00 percent (Prime + 1.00), while a five year term is available at 3.80 percent (Prime + 0.80).
Alberta mortgage rate comparison
When you are looking into mortgages, while the interest rate is an important number, there are other things to consider as well. Different lenders have different fee structures when it comes to originating the loan and moving through closing. A lot of the time, home buyers overlook these costs in the euphoria of making a home purchase, particularly if it is their first home, and since these costs end up getting rolled into the loan so you don’t have to pay it up front. However, differences between lenders in closing costs can lead to tens of thousands of dollars that you pay in additional principal and interest down the line with your loan. So don’t be afraid to shop your loan around and find the best deal in terms of a combination of interest rate and closing costs.
Fixed and variable rate loans in Alberta
Choosing between fixed and variable rate loans is an important decision in Alberta. If you go with a variable rate loan, the rate can shift after an introductory period to follow the market. Because rates are so low right now, it is hard to argue that a variable rate loan is worth the gamble, but as rates go up, if variable products stay at a lower rate, they may make more of a viable choice.
Best Edmonton Mortgage Rates
Are you in the market for a house in Edmonton? One thing you will definitely want to know is the Edmonton Mortgage Rates or Interest Rates. It determines the cost of your home over time. The price is an important factor as well, of course, but the interest rate determines how much it will cost you to borrow the funds to buy the house over time. Just because you are buying a house for $400,000, for example, does not mean that the house will cost you that much. The interest you pay for the loan adds significantly to that cost, and each quarter-point and half-point on the interest rate will add up.
Here’s a hypothetical case. Let’s go back to that $400,000 house. If you put $80,000 down (20 percent), you are taking out a loan for $320,000. You avoid mortgage insurance because of your 20 percent down payment, and you choose a ten-year fixed rate loan with a 20-year amortization. With a 5 percent interest rate, your monthly payment would be $2,102.81. If you could find a loan at 4 percent, though, your monthly payment would drop to $1,933.59. Over the course of 240 payments (12 monthly payments a year for 20 years), you would save $40,612.80. That would make a huge impression on that college fund you’re making for your kids, or a nice down payment for a vacation home.
If you are looking at a variable loan or a short term loan (less than five years), you need to understand another term: the benchmark rate. Lenders who want to see if a buyer is qualified for Edmonton mortgage rates for those loans use the benchmark rate as a part of their calculations. This is just one of many regulations that the Canadian government has put in place to lower the volatility of the mortgage and real estate market in the country. When the benchmark rate first came out in 2010, they had to come from the higher five year rate that the Bank of Canada was issuing for conventional loans. This rate would ideally represent the mean of bank rates. However, over time, this rate has turned out to be considerably higher than what is available through mortgage brokers in Edmonton, as well as through such alternative lending sources as Amansad Financial. At most times, the benchmark rate is approximately 1.5% higher the best interest rates that a mortgage broker or alternative financing specialist can find. Currently, the most up to date Edmonton benchmark rate is 5.34 percent.
The idea behind the benchmark rate is not to make access to loans difficult. After all, if banks can’t lend money, their revenue stream will dry up. The purpose is to keep the industry safe from the rash of foreclosures that happened after the economic downturn of 2008 and 2009. If you can qualify through the benchmark rate, you can theoretically pay your loan off on time with some financial margin. If the country hits another serious recession, or interest rates start to climb, this means that you will not lose your home. Instead, you have some wiggle room if your variable loan rate shoots up, or you find that interest rates are a lot higher when it is time for mortgage renewal. If you have been looking for fixed Edmonton mortgage rates, you may have seen that rates tend to climb as the term of the loan lengthens. This is because the bank commits to letting you have its money for a longer period of time, instead of calling it back in. In Edmonton, the Bank of Montreal offers a fixed five year closed mortgage for a rate of 3.29 percent; at the same time, you can secure a variable five year closed note for 3.00 percent.
Best Mortgage Rates Calgary
If you are looking at buying a home in Calgary, one of the most important figures in the process is the interest rate. While you might be more focused on the size of the down payment you can put together, even small fluctuations in the interest rate can make a huge difference over the life of the loan. Let’s say you are buying a house for the price of $200,000. You put 20 percent down ($40,000), meaning that your loan value is $160,000. Let’s say you get an interest rate of 5 percent, with a PMI premium through CHMC of 0.5%. With a 25-year amortization, your monthly payment would be $935.34. If you could get a rate of 4.5 percent, though, your monthly payment would only be $889.33. That doesn’t seem like a huge change, but remember that you’ll be making 300 payments over the life of a 25-year loan. The difference is $46.01 per month; over 25 years, that difference adds up to $13,803 — enough for a small car. What if a rate of 4 percent was available, though? Now the payment is $844.54. Now the total gap over time is $27,240. This is a substantial amount of money. Understanding how interest rates work in Calgary is important.
Looking for the best mortgage rates in Calgary Alberta? Realizing how rates work begins with a definition of the benchmark rate. Not everyone is looking to amortize their loans over 25 years; some people are looking for something much shorter term, along the line of 10 years, or even five or less. Lenders who are trying to qualify Calgary borrowers looking for a mortgage term that is shorter than five years, or who want a variable rate loan, have to use the benchmark rate in their calculations. The reason for this requirement is that the Canadian government is trying to cut down on the amount of volatility in the mortgage market. When the first rates were set in the spring of 2010, the idea was that the rate should come from the higher five year rate for conventional loans from the Bank of Canada, and the rate was supposed to represent a typical average of bank rates. However, the conventional rate for a five year loan and posted interest rates from banks are significantly higher than what you can find through Amansad Financial (or, to be fair, just about any mortgage broker in Calgary. Usually, the benchmark rate sits about 1.5 percent above the best rates you can find from a mortgage broker. At the time of this writing, the last reported Calgary benchmark rate was 5.34 percent.
The purpose behind this rate is to make sure that people who qualify for a loan in Calgary have some financial breathing room. If another economic downturn hits, or interest rates go up, this keeps borrowers from having to lose their homes. This has happened in the past when borrowers signed up for a variable rate loan, only to see those rates go up. The borrowers were not able to afford the new payments, and amortization went negative, which is definitely not a positive outcome.
If you have been looking for fixed Calgary mortgage rates, you’ve probably noticed that rates go up with the term of the loan. This is because the bank is having to leave its money with you longer, instead of having it back at its disposal. In Calgary, Bank of Montreal offers a fixed five year closed mortgage at 3.29 percent, while a variable five year closed mortgage is available at a flat 3 percent.
Not everyone can qualify for a loan through a bank or other traditional lending source, though. The banks generally want people to have between 5 and 20 percent down as a minimum, as well as a good credit score and a verifiable track record of income. There are many people who have the means to make house payments every month, though, who don’t meet those qualifications. Some of them are self-employed and as such have a difficult time proving that they have sufficient income over time. Some business owners have an income that fluctuates, and so while they would have enough money coming in quarterly or annually to cover their living expenses, the fact that it is not the same each month often worries traditional lenders. Others have saved up a hefty down payment but have financial problems in their past, which is why their credit scores are subpar.
Contact our office for more information pertaining to Private and Alternative Mortgage Lending Rates, Conditions, and Terms in Alberta. Amansad Financial has helped many people in this sort of situation. We connect potential home buyers who can’t quite qualify for the traditional lending standards with private individuals and companies who invest in real estate by providing private mortgages. Hundreds of clients in western Canada, including Alberta, have made their home ownership dreams come true by starting out with a private mortgage and then moving to a traditional lender at the end of that term by cleaning up their finances.
If you are interested in pursuing a mortgage in Alberta, give one of our mortgage experts at Amansad Financial call today to discuss the Best Mortgage Rates in Alberta.