Mortgage Rates are Complicated: Different Types and What they Mean to You

 

Gone are the days that you can pick up the phone and call your Bank or Mortgage Broker to find out what the best rate you can get is.  If you do, you are likely to be asked several questions as interest rates have become very complicated.  Fortunately, having been a Mortgage Broker for near 2 decades, I have some creative solutions that can help get you the best mortgage.   

Here is a list of some of the major classifications of interest rates.  These are not to be confused with either fixed or variable rates as you would be selecting a term that fits your needs based on the criteria below. 

ü  Insured Rates

ü  Insurable Rates

ü  Un-Insurable Rates

Insured Rates allow you access to the absolute best rates in the marketplace.  To have an insured rate, you must be or previously had purchased a house with less than 20% down.  So, if you are purchasing a home with less than 20% or if you previously bought a house with less than 20%, they you would have paid mortgage default insurance, like CMHC, and this qualifies your mortgage product as an Insured Mortgage.  Insured Rates can apply to New Home Purchases, Spousal Separation Mortgages, 2^nd Home Purchases and Mortgage Transfers. 

Insurable Rates are the next best and allow you access to very reasonable rates.  You would likely have an Insurable Rate on your mortgage if you purchased or are purchasing a home with more than 20% down, thus avoiding the requirement for you to pay mortgage default insurance.  With an Insurable Rate, the mortgage would still be insured by mortgage default insurance like CMHC, but the cost is picked up by the lender and for this reason the interest rates become a little higher.  You can still qualify for the best Insured rates if you have 35% to put down or have 35% equity in your house.  These rates are priced in Loan to Value increments.  So, with 35% down payment or 35% equity in your house will offer you the best rates, when you get to 30%, they get higher, and then again at 25% and then finally at 20%.   Insurable rates can apply to New Home Purchases, Spousal Separation Mortgages, 2^nd Home Purchases and Mortgage Transfers.

Un-Insurable Rates are rates that are offered which are a little higher than all the previously mentioned.  They are considered un-insurable as mortgage default insurers such as CMHC won’t insure them.  They are typically applicable in situations where you want to refinance your house or extend the amortization of your mortgage to 30 years.  As they are un-insured, the lenders must source different funds for these mortgages.  You could typically see an increase from an insured rate to an un-insurable rate of around 0.5%.  Un-Insurable Rates can apply to New Home Purchases, Rental Property Purchases, Refinance Mortgages, Spousal Separation Mortgages and 2^nd Home Purchases. 

As there are many nuances to interest rates, again, having been a Mortgage Broker for nearly 2 decades, I have figured out some strategies to accomplish obtaining the best possible mortgage for your situation. 

Contact me to find out what type of rate and mortgage you qualify for. 

** OAC, Rates Subject to Change and are subject to lender / insurer approval.