4 Shopping Tips for Better Mortgage Rates

Whether you are looking for a mortgage rate for your new home or looking to renew at the end of a term, there are many lenders available with different offers. As a result, you are in the driver’s seat when it comes to securing a mortgage rate. Here are some tips when shopping for mortgage rates, giving you the chance to secure the best one possible.

1. Shop around

You may do a lot of your banking at one institution, and if so, it can be easy to become impartial to them, turning to them for all of your financial needs. However your mortgage is one of your biggest debts and you want to save on it if possible. Therefore, you need to shop around for the best rate.

There is no harm in approaching the lender that you are used to dealing with first to explore your options for a mortgage. However, do not agree to the rate they offer right away. Take the rate they give you and make appointments at other lenders. If a different institution offers you a better rate, agree to do business with them or take it to lenders you have already met with to see if they can match it.

2. Research

Mortgage rates can fluctuate frequently. While it may only be a difference of less than 1 percent, over the course of a mortgage term this can be a lot of money.

Before agreeing to a mortgage rate, do some research to determine what typical rates are. If they are less than your current rate, you can approach lenders a lot easier when you know what you should be asking for. Keep in mind that the rate posted by lenders is never the lowest rate. If they want your business bad enough, there is always some wiggle room. Because your mortgage is a big investment and you will be paying the interest on the rate you receive for years to come, you cannot afford not to negotiate.

3. Lender vs. broker

When it comes to mortgages, there are three popular options: banks, credit unions, and brokers. All come with advantages and disadvantages and being aware of them will ensure you get the best mortgage rate possible.

Banks offer competitive mortgage rates and most people get their mortgages through them. However, they only sell their own products. Therefore, they are usually unwilling or unable to offer a lower rate if requested or cannot go as low as you want. Credit unions offer great customer service and are usually able to keep pace with bigger lenders by offer competitive rates.

However, many empty cross-selling tactics, meaning even if you get a favourable mortgage rate you could end up with other accounts that could put you more into debt. Mortgage brokers have access to multiple lenders and can usually get you a rate not offered by anyone else. However, mortgage brokers only deal with mortgages and as a result you may be missing out on a discounted rate offered by other institutions for having all financial accounts in one place.

4. Fixed vs. variable

Mortgage rates offer two types of rates: fixed and variable. A fixed mortgage rate means the amount is the same on every payment towards the principal that you make. A variable rate changes depending on the prime lending rate specified by the lender.

Before settling on a type of mortgage rate you need to examine your needs and what you can commit to. If you are on a fixed budget and do not want any surprises, a fixed rate will be most beneficial. That way, you know what to expect every payment. However, these rates come with a premium charged for stability. As a result, a variable rate may save you money in the long run albeit with some uncertainty between payments.