Four reasons why you might not get the great mortgage rate you saw online

The internet isn’t the friend it once was to people looking for the lowest mortgage rate.

All the mortgage-rate comparisons you’ll ever want to see are available online, but there’s an increasingly problematic lack of context and explanation. If you spot a great rate online, look for asterisks and fine print that explain who qualifies. Lots of people won’t.

Here’s a roundup of some of the most common reasons why the best mortgage rates you see online may not be available to you or have unexpected twists.

You have a down payment of 20 per cent or more

People who have a down payment of at least 20 per cent are considered better lending risks than people who put less money down and thus don’t have to pay for mortgage default insurance. Yet mortgage rates are notably better for people who put less than 20 per cent down and thus have what’s called a high-ratio mortgage.

Mortgage lenders offer better rates on high-ratio mortgages because of mortgage-default insurance. Lenders know they’re protected if you stop paying your mortgage, and that means they’re more willing to offer a good rate.

RateSpy.com’s best fixed five-year rate for insured mortgages on March 4 was 2.99 per cent, while the lowest uninsured rate was 3.34 per cent. On a five-year variable rate, the lowest insured mortgage rate was 2.64 per cent and the best uninsured rate was 3.18 per cent.

You’ll commonly find mortgage brokers advertising insured rates (they may note this in fine print at the bottom of their rate sheet). Slightly less than half of first-time home buyers had down payments of 20 per cent or more over the past three years, says a report from Mortgage Professionals Canada (which represents mortgage brokers).

You don’t live in the right province

On RateSupermarket.ca at midweek, the three best five-year fixed-mortgage-rate deals for a $400,000 house bought with a 15-per-cent down payment in Hamilton were 3.14, 3.24 and 3.29 per cent. In Montreal, the three lowest rates quoted were 3.23 per cent, 3.54 per cent and 3.99 per cent. In Moncton, the lowest rates were 3.29 per cent, 3.54 per cent and 3.99 per cent, and the lowest rates in Regina were 3.14 per cent, 3.54 per cent and 3.99 per cent.

LowestRates.ca showed rates as low as 3.09 per cent to 3.23 per cent, depending on the province. Certain markets have attracted fewer mortgage lenders beyond the big banks, and that means less intense competition.

You’re buying a house in Toronto or Vancouver

Mortgage-default insurance can only be obtained for homes priced at less than $1-million, which presents a problem in the Toronto and Vancouver markets. The average detached-house price in Toronto proper was $1,294,936 in February, while the Real Estate Board of Greater Vancouver’s benchmark home price was $1,443,100.

If you’re buying a house priced at $1-million or more in these markets or any other market, you’ll still need a down payment of at least 20 per cent because of federal mortgage regulations. For reasons described above, this will prevent you from getting the lowest possible mortgage rate.

Sundry fine print

RateSpy lists a 3.44-per-cent, five-year fixed rate offer that is described as an estimated “discretionary rate” that applies to well-qualified new – not existing – customers. This rate was estimated using typical rate discounts and market intelligence. Customers were urged to double check it with the bank.

Sometimes, the lowest rates are for what’s known as a quick-close mortgage. Mostly, lenders will hold a good rate for you for 90 to 120 days. A quick-close deal might be held for 60 days or less.

Finally, some mortgage deals are subject to minimum and maximum loan values and some impose limits on prepayments. If you plan to put some cash into your mortgage to reduce the principal, check on the rules for making lump-sum and double-up payments. Double-ups allow you to double your usual payment and have the extra applied to your principal.

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