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  2. Does a Bigger Down Payment Mean a Lower Rate?

Does a Bigger Down Payment Mean a Lower Rate?

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Oh, the times they are a-changing! When it comes to mortgage financing, there has been a whirlwind of activity lately, completely altering what you thought you knew. In Canada, much of the financial market has been skewed and in jeopardy in recent history, with the real estate industry in a particular state of flux. These circumstances have resulted in different regulations and the like influencing the state of mortgage financing throughout all of Canada. The Canadian Mortgage and Housing Corporation recently increased insurance premiums, which has contributed to a huge shift in the nature of the market. So, what does this mean for the average home-buyer in Kelowna?

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What is arguably the most terrifying implication of these fiscal changes to the market is the way that the ratio of down payment to interest rate has been altered, leaving you with wildly confusing and seemingly illogical circumstances. Unless you have the time to fully educate yourself with all of these changes, your best bet is to work with a Kelowna mortgage broker to find the best method of action. The fact of the matter is, gone are the times that you pay a large down payment and secure a low interest rate on your mortgage. In fact, many borrowers who pay a smaller percentage down are ending up with lower rates. To get the most out of your home-buying, you need to seek the experience of professional mortgage broker in Kelowna.

How Does This New Ratio Make Sense?

Without an experienced mortgage broker in Kelowna explaining the intricacies of the rules to you, you will be hard pressed to find a comprehensive guide to the regulations. However, there are some basic principles that might improve your overall understanding of the tight spot most prospective homeowners are now in. You see, with high ratio mortgages, the insurance is required as a part of the rate. Therefore, if you pay less than 20% down on your mortgage, you automatically have the default insurance incorporated into your overall cost. However, when you pay 20% or more as a down payment, the insurance is optional. Just because it is not legally required does not mean it will not be incorporated, though. Most lenders opt to insure these mortgages anyway, which is where the rub comes in. With the increase in premiums, lenders cannot afford to continue charging at the current rate. Therefore, they jack up the cost of the mortgage rate.

All that said, rates are really good right now as we are at all-time historic Canadian lows. Comparatively, any rate today is a good rate! If you want to discuss your options, look at all the numbers, and figure out the best mortgage product for you, please don’t hesitate to contact us anytime!

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