Are you having troubles finding the best mortgage rates in Ontario? What if there was a way to simplify the entire search process, giving you the best mortgage rates across all of Ontario right at your fingertips? Loans Geeks’ mission is to simplify this very process, giving you (the borrower) access to all of Ontario’s best and most reputable mortgage brokers in one spot. Here at Loans Geeks, teams of researchers work tirelessly to conduct the research and analyses that go into finding the top mortgage brokers, with the lowest mortgage interest rates in your location so that you don’t have to. Loans Geeks is essentially a one stop shop to all of the lowest mortgage rates in Ontario, saving you money and time.
Mortgage Calculator for Ontario
The most important aspect of borrowing money is the concept of budgeting and planning. Even with the cheapest mortgage rates one can find in Ontario, a borrower should plan exactly how much it is you’d like to borrow, the timeline for which you plan to pay the borrowed sum off, and the interest rate that applies. With this knowledge, you can calculate the exact monthly payment requirements of your loan/mortgage, and it’s easier than you think!
With access to the internet, anyone can utilize this tool commonly referred to as a mortgage calculator. The mortgage calculator allows users to enter the aforementioned details such as total sum borrowed and interest rate and it computes a dollar total that amounts to how much you as a borrower should be paying each month. While you can add essentially anything to your mortgage, if you have the extra room for it, it would be wise to calculate your expenses beforehand and use the mortgage calculator to grasp a better understanding of the effects. While mortgages are generally the cheapest form of debt, it is important to remember that this debt is only being postponed and that even the best mortgage rates in Ontario will increase the length of which you’ll be making payments. As well, the amortization of your mortgage will also increase exponentially as the length of said mortgage continues. With this said, it is extremely important to budget your expenses, and mortgage calculators are there to help.
Mortgage Brokers in Ontario vs. The Banks
How do you get a mortgage in Ontario? As a borrower, should you go to the bank or one of Ontario’s mortgage brokers to find the right mortgage rate for you? Well, there are pros and cons to each, but generally speaking, it is best to use a mortgage broker if you are looking for the lowest mortgage rates in Ontario. The reason for this being is that a mortgage broker will negotiate on your behalf amongst many different lenders to get you the best terms and lowest rates. One of the best parts of this is that mortgage brokers will offer you these services for free. If you are looking for lower interest rates because of low household income, then the banks may not always work with you, primarily to help manage risk on their end. In cases such as these, mortgage brokers are extremely helpful as they will help those despite their less-than-perfect finance situation. If you struggle with low household income or blemishes on your line of credit, a mortgage broker will not only work to help you, but will still attempt to negotiate the best mortgage rates in Ontario for you. With this said, they still earn commission from the lending institution so if possible, it is wise to do some research on your own to ensure you are receiving the best possible financing for you.
Banks are a still viable option for your mortgage needs. Many first home buyers don’t have relationships built with mortgage brokers and in these cases the banks are deemed more trustworthy, as you’ve built some relation with them over several or many years. Again, the bank may not always agree to finance your decisions should you have financial issues, past or present, but this may also indicate that one is not financially ready for a commitment of this stature. Keep in mind that mortgage rates offered by the bank may not be as low as from a broker, as they do not search for the lowest rates, they simply lend at the risk of their clients.
All in all mortgage brokers are in most circumstances beneficial when looking for the lowest local mortgage rates in Ontario, something that should be considered when searching for financing.
Private Mortgage Lender in Ontario
We’ve established that as a borrower you can apply for mortgages through the banks, or a mortgage broker that will find the lender for you. However, these are not the only two options available. There are private mortgage lenders all across Ontario that offer short term loans to those that aren’t applicable through the more conventional methods, banks and mortgage brokers, for whatever reason that may be.
Private mortgage lenders are high risk mortgage lenders and are sought out for numerous reasons, and is typically used as a last resort. One reason being that the borrower is in need of financing as soon as possible, and doesn’t have time to go through the longer application process that banks or even brokers require. Second, the borrower may have a credit history so bad that no lender is willing to finance them, and lastly, the property to be purchased is one that is deemed harder to sell, such as a log cabin in a very rural area.
You may be asking, what exactly are private mortgages? A private mortgage is a short-term, interest only loan, and will have some of the highest mortgage rates in Ontario. These loans require no down payment, but rather interest payments each month. The reason for this being that these mortgage lenders understand that you, the borrower, are in a situation, most likely related to bad credit history, that omits you from any other form of financing. As such, they charge higher rates will only last 1-3 years as a general rule of thumb.
Fixed Vs. Variable Mortgage Interest Rates in Ontario
When applying for mortgages in Ontario, there are two different types of mortgage rates to consider and compare. The first of these two is a fixed rate mortgage. The fixed rate is and has been the more popular of the two, but not because it acts as a cheaper alternative to a variable rate mortgage. Fixed rates are more popular due to the fact that they provide a sense of regularity and stability. Borrowers set a duration for the mortgage term and the interest rate and payments are fixed. This makes it much easier to budget your expenses and offers that protection against any uncertainty.
Variable rates are less popular, but historical trends prove that variable rate mortgages are in fact less expensive over time. As opposed to the fixed rate mortgage, variable rates fluctuate according to the market interest rate, also known as the prime rate, and as such is less stable. This financial uncertainty is what deters many people from selecting a variable rate, despite its proven history.
When deciding which mortgage rate to select it is important to determine whether or not the prime/market interest rate is expected to fall or not. If the interest rate is low, it may be smart to select a fixed mortgage rate. In this situation your interest rate would be low and void of an increase that could cause a financial liability. If the prime rate is expected to decrease in the coming years, a variable rate should be considered. The decrease in the prime rate would decrease your interest rates and save you money.
Red: Variable Rate mortgage Blue: Fixed Rate mortgage
The table above shows the average of a 5 year fixed and variable mortgage rate since 2007. As you can see, the variable rates are less expensive in comparison to the fixed rates, and savings over time will only continue to increase.
Historical Ontario Prime Rates
What is a prime rate? A prime rate is essentially the interest rate that commercial banks and other financial institutions use to set interest rates for variable loans, such as the variable rate mortgages, and lines of credit. This prime rate is based on how much it costs financial institutions to borrow money, fluctuating as a result of changes in the economy. The current prime rate in Canada is 3.45% after increasing in recent years. While the prime rate has continued to increase since 2015, it is still relatively low when we look at the history of Canada’s prime rate. It is important to analyze historical trends such as these to help your search for the best mortgage rates in Ontario, especially if you are looking for the best variable mortgage rate.
As you can see, the prime rate in Canada over these last 10 years have been the lowest it has ever been since 1935. The large spike in the 1980’s is a result of the Federal Reserve increasing interest rates in an attempt to avoid double inflation.
Ontario’s Mortgage Rates Forecast
Due to the inflation Canada is experiencing, one can only forecast average mortgage rates in Ontario to follow suit with the prime rate and continue to increase. Unemployment levels are low, consumer spending is high, and the stock market is reaching new levels. What this means for mortgage rates in Ontario is that they will also increase in an attempt to provide some balance in the economy and attain an economic equilibrium.
The Bank of Canada government is suggesting we expect an increase of 0.25% in even the best mortgage rates over the coming months. The sharp increase in minimum wage is no help and interest rates are expected to increase into 2019.
Whether you use this information to apply for a fixed rate or variable rate is up to you. An increase in the near future does not necessarily mean that variable rates are out of the question. Rates are not expected to increase forever, there will be a point in which they decrease again and history shows that in time, more often than not, they will outperform even the best 5 year fixed rate mortgages. Remember to consider the prepayment penalties on fixed mortgages and examine all the costs associated.
Ontario’s Housing Market
The Ontario’s housing market has seen tremendous gains over the past several years, with prices skyrocketing upwards of 23% in a single year. There has been a tight supply of housing in Ontario and relatively low mortgage rates which make real estate extremely hard to come by. With so many buyers and so few homes, the housing market has grown significantly. This increase in prices has driven economic growth considerably but is expected to slow down in 2018.
Experts believe that the housing market may continue to increase, but at a much slower rate than what Ontario has seen in recent years. The housing market as a whole is expected to moderate to very slight growth, slowing the market completely.
With Toronto being the housing market growth leader in all of Canada, Ontario will see much larger increases in current average mortgage rates than the large majority of Canada’s provinces. In addition to this, new mortgage rules will be in effect, making it more difficult for home-buyers to successfully apply for a mortgage. With this said, it is still unlikely that the prices in the housing market will decrease due to the fact that the demand remains high and the supply is still very low.
Average House Prices in Canada from 2013 to 2017