The Rate Today
Rita Cousins Senior Mortgage Advisor • February 12, 2020
In order to find out how the current rate impacts Canadian consumers, we must firstidentify insured and uninsured borrowers.
Do you have less than 20% down?
Securing an insured mortgage (otherwise known as a highratio mortgage) means having less than 20% down, and the mortgage will be backed by the Canada Mortgage Housing Corporation (CMHC), Genworth or Canada Guaranty.
A mortgage with less than 20% down is required to have insurance. The insurance premium is a one-time amount added to the final mortgage balance. This insurance is also referred to as default insurance which protects the mortgage lender in case there is a loss in principal balance as a result of a mortgage foreclosure. Both the lender and the insurer need to approve your application. The maximum home price allowed on an insured mortgage is $999,999. The maximum amortization for an insured mortgage is 25 years.
Qualifying with less than 20% down
All insured mortgages need to qualify using the Bank of Canada’s Conventional 5 year fixed posted rate (also referred to as the Benchmark Rate). The current rate is 5.19%. Once qualified, a mortgage broker will then start to shop the market to get the best financing options. Once the right fit is found, the rate presented is called the Contract Rate, and is what mortgage payments are based upon.
Since this is considered a high-ratio/insured buyer, in most cases, the default insurance premium is added to the mortgage balance so the buyer is not out of pocket. However in doing so, this means the buyer is charged the mortgage interest rate on the insurance premium amount.
Default insurance protects the lender, which reduces its risk and that is why mortgage rates are typically lower for insured transactions.
Do you have more than 20% down?
Securing an uninsured mortgage (otherwise known as a lowratio/ conventional mortgage) means applying for a mortgage
that meets one of the following criteria:
- It is a purchase of $1 million or more
- A minimum down payment of 20%
- The purchase of a non-owner occupied single-unit rental;
- Refinancing (i.e. replacing the current mortgage loan with an increased mortgage size)
Qualifying with more than 20% down
To qualify for an uninsured mortgage, it is mandatory to use the higher of the two rates; the contract rate + 2% OR the Bank of Canada’s 5.19% qualifying rate. These mortgages can have 30 year amortizations and have a home value of any size. Conventional mortgages are higher risk for lenders as they are without the protection of default insurance, hence the rates tend to be slightly higher for a conventional mortgage.
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Developers in British Columbia are offering steep discounts as new inventory keeps stacking up, fuelling competition for buyers who can afford to shop around. In Kelowna, Mission Group had a one-day flash sale on Saturday on all vacant inventory at its Alma on Abbott development, a boutique lakefront community located in Pandosy Village that was completed in October. Mission Group president Luke Turri said half of Alma’s 87 units – ranging from studios to three-bedrooms – need to be sold. With the discount, one- and two-bedroom units will be roughly $425,000 to $505,000. “We realize that we have to meet the market where it’s at,” said Turri, who’s been in the field for 20 years. He said today’s buyers are highly informed and cautious. “Buyers are seeing price corrections, incentive programs, construction delays, interest rates swinging, and they need certainty, they need credibility, and so for us the focus is, how do we create that momentum?” Turri said Alma had a successful pre-sale launch, and Mission Group had always anticipated having available inventory after completion due to its target audience of end users, rather than investors. In its latest monthly report, the Association of Interior Realtors said the market maintained a “gradual and steady pace” in October. Still, inventory levels are elevated compared to historical norms. Interior Realtors reported 8,938 active listings at the end of last month, comparable to fall 2024 levels, but well above the 10-year average. 👉 Read the Article Here
Holiday magic is happening all across the Fraser Valley this season. From tree lighting ceremonies and festive markets to concerts, parades, and family-friendly celebrations, there's no shortage of ways to embrace the spirit of the season. 👉 Guide Here
