Definition of a mortgage interest rate
An interest rate is a percentage of the loan the bank or lender charges in order to borrow money from them, usually expressed in an annual basis. Essentially it is the cost of the debt (mortgage) you take on in order to purchase the property.
Who decides the interest rate you pay?
Interest rates are affected by the rate in which financial institutions borrow money from the Bank of Canada, which is itself an interest rate influenced by macroeconomic concerns. Most lenders have different rates based on their unique offerings. That is why at Homewise, we have relationships with multiple lenders to find our users a mortgage that best meets their needs.
Difference between a fixed, variable and adjustable rate
A fixed rate mortgage is one in which the rate stays the same throughout the term of the mortgage. A variable and adjustable rate mortgage will go up and down relative to the prime rate of Canada. The difference between the variable and adjustable mortgage is that with the variable rate, even if the rates go up or down, your monthly payment remains the same. Monthly payments on adjustable mortgages will fluctuate as the rate changes. Generally speaking, a fixed mortgage rate will be higher than the variable/adjustable rate, because a borrower is paying for the peace of mind that their rate will not go up during the term. Speak to our mortgage experts to go over which product might be right for you.
