In the fall of 2016, there was a massive structural change in the mortgage world. Specifically, CMHC pulled out and ceased to offer back-end insurance for conventional loans. Little do most know, but most lenders relied heavily on this to fund their mortgages. The lenders panicked, naturally, because it became instantly more expensive to fund mortgages. When costs rise for a bank, the consumer ultimately takes the hit. Before diving deeper into it, it’s important to understand that insured mortgages are made up of less than 20% equity, while conventional mortgages have more. The big losers, of course, are consumers because a) they now have to pay more interest and b) shopping for rates online has become virtually useless and nothing more than a massive bait and switch program for lenders and brokers alike. So, in this new mortgage world, who actually gets the best mortgage rate?
Now, the best rate and the lowest rate are very different; however, only the bold and the ethical will likely outline the options rather than shove you into whatever term is going to get the deal done the quickest. So, without further ado, here’s the list of people who will the get lowest mortgage rate. The list starts at the very bottom of the barrel rates and works its way up.
And The Best Mortgage Rate Goes To…
- People purchasing with less than 20% down who are OK with a restricted mortgage rate (owner occupied property)
- People renewing an insured mortgage who are OK with a restricted mortgage rate (owner occupied property)
- People purchasing with less than 20% down (owner occupied property)
- People renewing an insured mortgage (owner occupied property)
- People purchasing with more than 35% down who are OK with a restricted mortgage rate who are OK with a maximum 25 year amortization (owner occupied property)
- People renewing with at least 35% equity who are OK with a restricted mortgage rate who are OK with a maximum 25 year amortization (owner occupied property)
- People purchasing with more than 20% down who are OK with a restricted mortgage rate who are OK with a maximum 25 year amortization (owner occupied property)
- People renewing with more than 20% down who are OK with a restricted mortgage rate who are OK with a maximum 25 year amortization (owner occupied property)
- People refinancing up to 80% Loan To Value who are OK with a 25 year amortization (owner occupied property)
- People who want a 30 year amortization (owner occupied property)
- People who’s properties are worth more than 1 Million Dollars (owner occupied property)
- People who are self-employed and write down their income (owner occupied property)
- People who are doing any of the above, but with a rental property
What Does This All Mean?
The problem is, this is about as simple as it can be laid out. In reality, there are more factors involved but it’s so convoluted that consumers have no idea what’s going on, and many industry members are none the wiser.
The big shame is in advertising. If you search for rates, be prepared to get excited for a split second. Next, take the BAIT. Make the call. Get the switch. Get pissed off. And run back to your bank or broker.
It’s a nasty game, but it’s the reality. If you have less than 20% down and are OK with minimal terms and certain restrictions, YOU are who the world of mortgages is advertising to.
