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Why Is My Mortgage Rate Higher than Advertised?

With the advent of sites like RateShop.ca that let you compare multiple mortgage rates at once, it’s easier than ever for people to get bombarded with promises of the lowest mortgage rate. You’ll probably see many different numbers floating around. So why is the number you get quoted higher than what you saw online?

The rates that most lenders and brokers advertise online and elsewhere are the best rates that a customer could theoretically get, but only under specific circumstances. Often, the best mortgage rate is a 5-year variable rate for insured deals for customers with amazing credit located in a large urban area. But what if you would rather get a fixed rate, or you have more than 20% down, or your credit isn’t great? Your mortgage rate will likely be higher.

 

Why Does This Happen?

It’s impossible to advertise everyone’s rate at once in a traditional advertisement. Because everyone’s financial situation is different, everyone’s mortgage rate will also be different. Even if you think your situation is the same as another person’s, there could be hidden or unnoticed factors that would cause one rate to be higher.

At RateShop.ca we’re able to show you your best rate because you can use our advanced mortgage filters to only show rates that actually apply to you. When you look at the best 5-year fixed rates, for example, you can filter the results by your credit score, your down payment, your credit history, your income type, and more. With that information, we filter the results to only those that you would qualify for. Other websites don’t ask as much information up front, and as a result can’t show you accurate results.

Take a look at the factors that we examine vs. what other websites ask for:

 

Factor

RateShop

Other Websites

Home Price

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Down Payment

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Rate Type

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Term Length

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Term Type

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Location

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Amortization

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Occupancy

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Payment Frequency

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Pre-approval

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Transaction Type

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Credit score

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Bankruptcy

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Consumer Proposal

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Income Type

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Know the Difference between THE Best Rate and YOUR Best Rate

For every rate you see advertised, there are some people that will qualify. However, until you actually apply for a mortgage, you won’t know if you qualify for that rate or not.

The only way to know the rate you’re going to get is to talk to your bank or mortgage broker. They’ll need info like your credit score, income, debt levels and more to give you an accurate rate quote.

You may go in expecting to get the rate advertised, but after learning that your credit isn’t perfect and you are self-employed, the broker may only be able to qualify you at a much higher rate!

Even if you do qualify for the lowest mortgage rate, it may not be the best mortgage for you. There are plenty of reasons why you might consider a mortgage with a higher rate. For one, the lowest mortgage rates all belong to no-frills mortgages.

No-frills mortgages are exactly like they sound. They don’t come with any extra features – it’s just the rate and possibly a small pre-payment allowance per month/year. No-frills mortgages won’t have features like:

-        The ability to port your mortgage

-        Large pre-payment allowances

-        The ability to pay off your mortgage with no penalty

-        Rate holds

-        Pre-approvals

-        Mortgage payment skipping

-        Accelerated payment schedules

Even if you pay a higher rate, these features can end up saving you thousands of dollars if you ever need to use them.

Some no-frills mortgages have even steeper penalties for breaking a mortgage early, which can be as high as 3% of the outstanding mortgage balance. The few hundred dollars you saved over the course of your term would be eaten up by such huge penalties!

Remember, talk to an expert broker before committing to a rate so you know exactly what you’re getting. You want to find the mortgage that’s best for you, not the mortgage that says it’s best for everyone.

 


Chris Chris 01/29/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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Sitemap Updated On April 21, 2019. Copyright 2018. All Rights Reserved. RateShop.ca

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