Is now a good time to act?

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If mortgage experts have one piece of advice, it's to not let perfect be the enemy of good — especially if you're already overpaying for a home.

“For Canadians looking to refinance or switch their mortgage, this is a great opportunity to find a rate lower than what they currently have,” says Jesse Abrams, founder and CEO of the online mortgage brokerage Homewise.

And if you're tired of your rent increasing year after year, you shouldn't miss the chance to buy a home without stretching your budget to the breaking point.

“While you can get approved for a mortgage at what’s called your ‘max affordability,’ that does not always mean it is in your best interest, as it could be hard to carry the monthly payments. So with rates dropping, this means that homebuyers across Canada will be able to pay less monthly.”

How are mortgage rates still dropping?

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The Canadian economy is heavily reliant on a stable and growing real estate market, Abrams says. When the COVID-19 pandemic struck and shut down other sectors entirely, the government focused on lowering interests rates, encouraging homebuyers even more.

With uncertainty lingering and the possibility of a second wave looming, he expects rates will continue to stay at record lows for the foreseeable future.

Abrams adds that he’s watched Canadians waiting for years to make a decision on the right time to pounce. While nobody has a crystal ball, he says, this may just be their moment.

“With rates as low as they are right now, there is hardly a time in Canadian history where your rate would come close to what you could get now,” he says. “While you may want to wait, keep in mind you would be getting a great mortgage if you bought or refinanced today.”

What should I watch out for?

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Zainab Williams, financial planner and founder of Elleverity Wealth Management, agrees that now is as good a time as ever, so long as you're in a comfortable financial position.

“Trying to figure out when the next drop will happen is next to impossible,” she says. “If the opportunity exists for you to save money, to qualify for a refinanced loan, then by all means take advantage of the low rates.”

Just remember, refinancing means qualifying for a whole new loan. You'll need to exhibit a good credit score and stable income to prove you can still meet your monthly obligations. If you can't impress, that new deal will begin to sour.

“If a lender determines that there is more risk for them to lend you a mortgage, then the accompanying interest rate will be higher, despite what is being given out in the market as the best mortgage rates,” she says.

Overall, Williams says, today's record-low rates are a great reward for consumers who have done their homework and reviewed their finances.

“Saving in interest costs can make such a huge difference in how long it will take you to become mortgage free,” she says.

How do I get started?

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Canadians who already have a mortgage may have to pay a hefty price upfront to switch, but the monthly savings are often well worth it.

“Rates were over 3.5 per cent in early 2019,” says Abrams, urging homeowners who are paying that much interest to look into refinancing. “While penalties can be large to break a mortgage early, the savings in this instance could be much larger."

Just don't get fixated on the lowest rate out there, to the point of ignoring all the other elements that make up a mortgage.

“Always be on the lookout for a full-featured mortgage,” he says. “Not only will more features enable you to save more, with products such as pre-payments, but going this route will also ensure that you don't get stuck with a mortgage that may have a high penalty due to that slightly lower rate.”

Want to see how much you can save, or how much home you can afford? You can ask Homewise to take the case and negotiate on your behalf with more than 30 banks and other lenders.

The service is entirely free of charge, and you can sign up in about five minutes below.

About the Author

Liz Beddall

Liz Beddall

Freelance Contributor

Liz Beddall is a freelance contributor to MoneyWise.

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