Posted Rate vs Actual Rate For Mortgage – What’s The Difference?

Are you wondering what sets apart the mortgage rates you see advertised from the rates you can actually get?

Well, you’re about to uncover the key difference between posted rates vs actual rates, and it could save you a significant amount of money.

Picture this: you spot a seemingly attractive mortgage rate advertised by a bank, only to discover that the rate you qualify for is considerably lower. So, what’s the deal?

Whether you’re a first-time homebuyer or looking to refinance, understanding this crucial distinction is essential for securing the best possible deal.

In this article, we will delve into the differences between these two types of rates and how they impact your mortgage.

Understanding Posted Rates

Posted rates, also known as the “bank rates” or “lender rates,” are the interest rates advertised by financial institutions, including major banks and credit unions.

These rates are prominently displayed on their websites, in branches, and through other marketing channels.

Posted rates act as a reference point for lenders to showcase the rates they are willing to lend at, but they may not be the rates you ultimately secure.

Higher Rates and Their Impact

One important thing to note about posted rates is that they are often slightly higher than the rates lenders are actually willing to offer.

Many clients, unaware of this fact, may end up accepting the posted interest rate without exploring other options.

By doing so, they may be paying more in interest over the life of their mortgage.

Negotiation and Bargaining

To secure better terms, negotiation, and bargaining skills come into play.

The primary purpose of posted rates is to attract potential borrowers and provide a standardized reference point for comparison across different lenders.

They help lenders create a baseline from which they can negotiate or offer discounted rates to borrowers. Given the high current mortgage rates in Canada, it is crucial to explore all options for securing a favorable rate.

Exploring Actual Rates

Actual rates are the lowest mortgage rates that lending institutions are willing to provide to borrowers based on their financial profiles, creditworthiness, and negotiation skills.

These rates are not directly available to walk-in customers but can be accessed through licensed mortgage brokers or with excellent negotiation power.

Benefits of Actual Rates

Obtaining discounted rates through a mortgage broker offers several advantages –

• It allows you to access the lowest rates available in the market, even when the rate hikes.
• It saves you the hassle of negotiating with multiple lenders individually.
• Working with an experienced broker streamlines the process, especially for first-time homebuyers.

Mortgage Brokers and Actual Rates

While posted rates represent the advertised rates, actual rates are specific to individual borrowers and depend on several factors such as creditworthiness, down payment amount, and loan term.

Mortgage brokers act as intermediaries between borrowers and lenders. They have established relationships with multiple lending institutions and big banks, giving them access to a wide range of mortgage products and rates.

Factors Influencing The Actual Mortgage Rate For You

Creditworthiness

Lenders assess borrowers’ creditworthiness by considering their credit score, credit history, and debt-to-income ratio. A good credit profile often leads to lower actual rates, as it indicates a lower level of risk for the lender.

Loan-to-Value Ratio

The loan-to-value (LTV) ratio represents the mortgage amount as a percentage of the property’s appraised value. A lower LTV ratio, achieved by making a larger down payment, can result in more favorable rates.

Loan Term

The term of the mortgage, such as a 5-year fixed mortgage, can affect the actual rates. Shorter-term mortgages often come with lower rates compared to longer-term options.

Market Conditions

The mortgage market is influenced by various factors, including economic conditions, interest rate trends, and competition among lenders. These market dynamics can impact the actual home loan rates offered to borrowers.

How Can Mortgage Brokers Get You The Best Interest Rates?

Personalized Service and Expert Advice

A licensed broker offers personalized service tailored to your specific financial situation and homeownership goals.

They provide expert advice, guiding you through the process of getting a mortgage and helping you make informed decisions.

Access to Multiple Lenders

Unlike banks, mortgage brokers have access to a variety of lenders, including major banks, credit unions, and independent lenders.

This extensive network allows them to shop around on your behalf, comparing rates and sets of terms to find the right mortgage option for you.

Simplified Mortgage Application

Navigating the mortgage application process can be time-consuming and overwhelming.

Mortgage brokers simplify this process by handling the paperwork, communicating with lenders, and ensuring all requirements are met.

This streamlines the application and approval process, saving you valuable time and effort.

FAQs On Posted Rate And Actual Rate Comparison

1. Do all lenders offer discounted rates?

No, not all lenders offer discounted rates. It’s essential to compare offers from different lenders to find the best available rate.

2. What is the difference between fixed-rate and variable-rate mortgages?

A mortgage with a fixed rate has a consistent interest rate throughout the loan term, while one with variable rates can fluctuate based on market conditions.

3. Are posted rates the same across all lenders?

No, different lenders may have different posted rates and discounted rates. It’s important to shop around and compare offers from various lenders to ensure you’re getting a great deal.

4. Can I negotiate with my current lender to lower my mortgage rate?

Yes, you may be able to negotiate with your current lender without switching to a different institution. However, working with a mortgage or a real estate broker can provide access to a wider range of options and potentially better rates.

5. How often do mortgage rates change?

Mortgage rates can change frequently, sometimes daily, depending on market conditions. It’s essential to stay updated and consult with a mortgage professional to take advantage of the best rates.

6. Can a mortgage broker help me refinance my existing mortgage?

Yes, mortgage brokers can assist you if you need to refinance your mortgage, explore options to secure low rates, access home equity, or adjust the terms of your loan to better suit your financial goals.

7. Is it worth paying the penalty to break my current mortgage for a lower rate?

Breaking your current mortgage may incur a penalty known as the Interest Rate Differential (IRD). A mortgage broker can help you calculate whether the savings from a lower rate outweigh the penalty, ensuring you make an informed decision.

8. Is the actual rate the same as the prime rate?

No, the actual rate is not the same as the prime rate either.

Actual rates represent the lowest mortgage rates offered by lending institutions. The prime rate is the interest rate charged by major banks to their most creditworthy consumers.

While the prime rate influences other mortgage rates available, it is not the same as the actual rate.

Let Us Help You Get The Best Mortgage Rates!

Understanding the difference between posted rates and actual rates is vital for anyone seeking a mortgage in Canada, especially when the rates are higher than usual.

While “posted rates” are the advertised rates, “actual mortgage interest rates” are the ones that lenders are willing to offer to borrowers.

Being aware of the factors influencing discounted rates, such as creditworthiness and market conditions, empowers borrowers to make informed decisions and find the most favorable mortgage terms.

Don’t settle for the posted rates when the actual rates could save you thousands of dollars over the life of your mortgage payments (amortization period).

Don’t go in blind; call me.

At Sandra Forscutt, we understand the importance of finding the best mortgage rates tailored to your needs. Our team of experienced mortgage brokers is dedicated to helping you navigate the complexities of the mortgage market.

Contact us today for personalized assistance in securing the best rates and finding the mortgage loan that suits you best!