If you’re struggling to understanding interest rates and how they apply to your mortgage, we’ve got you covered. Just take a read though the information below for a quick primer. And if you have any further questions, we’re standing by to answer them. Just drop by your local branch or give us a call at the True North Hub at 1-866-413-7071.
When it comes to homebuying, an interest rate, also sometimes referred to as often a mortgage rate, is the amount a lender charges a borrower and is a percentage of the principal—the amount loaned. You can think of it as the cost of borrowing.
It all starts with the Prime Lending Rate, which is determined by the Bank of Canada. This rate is often adjusted based on a number of economic factors, usually to regulate inflation, stimulate a flagging economy or cool down an ‘overheated’ economy. You can think of the Prime Lending Rate as the baseline that banks and credit unions use to set their posted rates. When setting their posted mortgage rates, financial institutions consider factors like the length of the mortgage term, the type of rate (fixed or variable), as well as the applicants credit history and employment status.
The two most common types of rates are fixed and variable mortgage rates. With a fixed rate, your monthly mortgage payments will stay the same throughout the term of your mortgage. Whereas with a variable rate, your monthly mortgage payments fluctuate based on the Prime Rate. Historically, variable rates are lower because they involve less risk for the lender, but fixed rates provide the security of ‘locking in’ at a rate and payment you know you can afford.
If you know the price of your new home, your down payment amount and mortgage rate, term and amortization, you can calculate your monthly payments. The easiest way is to use our handy monthly mortgage payment calculator.
We’re proud to be able to offer our members some of the most competitive mortgage rates in the north. But don’t take our word for it – explore our mortgage rates for yourself.
If you have any questions as you navigate the purchase of your new home, we’re here for you with advice you can trust. Just book an appointment with a Northern Mortgage Expert online.