3 reasons you may not get that mortgage rate you saw online

1. You have a down payment of 20 per cent or more

People who have a down payment of at least 20 per cent are considered better lending risks than people who put less money down and thus don’t have to pay for mortgage default insurance provided by companies such as CMHC. Yet mortgage rates are notably better for people who put less than 20 per cent down and thus have what’s called a high-ratio mortgage.

Mortgage lenders offer better rates on high-ratio mortgages because of mortgage-default insurance. Lenders know they’re protected if you stop paying your mortgage, and that means they’re more willing to offer a good rate.

2. You’re buying a house in Toronto or Vancouver

Mortgage-default insurance can only be obtained for homes priced at less than $1-million, which presents a problem in the Toronto and Vancouver markets. The average detached-house price in Toronto proper was $1,294,936 in February, while the Real Estate Board of Greater Vancouver’s benchmark home price was $1,443,100.

If you’re buying a house priced at $1-million or more in these markets or any other market, you’ll still need a down payment of at least 20 per cent because of federal mortgage regulations. For reasons described above, this will prevent you from getting the lowest possible mortgage rate.

3. Read the fine print

Some five-year fixed rate offers are described as an estimated “discretionary rate” that applies to well-qualified new – not existing – customers. This rate is estimated using typical rate discounts and market intelligence. Customers are urged to double check their eligibility with the lender.

Sometimes, the lowest rates are for what’s known as a quick-close mortgage. Mostly, lenders will hold a good rate for you for 90 to 120 days. A quick-close deal might be held for 60 days or less. This may impact your purchase agreement or timeline moving into your new home.

Finally, some mortgage deals are subject to minimum and maximum loan values and some impose limits on prepayments. If you plan to put some cash into your mortgage to reduce the principal, check on the rules for making lump-sum and double-up payments. Double-ups allow you to double your usual payment and have the extra applied to your principal.

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