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Guide to comparing mortgage rates in Alberta
The Alberta mortgage rates displayed on this page are provided to NerdWallet by Homewise, a licensed mortgage broker that partners with lenders across Canada.
These mortgage rates are refreshed daily, representing the latest mortgage options available from Homewise’s lender partners. The rates come directly from Homewise’s lender partners and are updated by Homewise to provide the most accurate options for you each day.
» MORE: How mortgages work in Canada
What’s a good Alberta mortgage rate?
The short answer is: the lowest possible rate for which you can qualify based on the mortgage type you want and the amount you need to borrow.
The longer answer to this question requires some historical context. According to Statistics Canada, the average conventional mortgage lending rate for loans with 5-year terms was 7.18% in 2001, 4.57% in 2011, and 3.28% in 2021.
You can see that while 5% would have been an excellent mortgage rate in 2001, relative to the average, it wouldn’t have been so great in 2021.
Although mortgage interest rates have increased in 2022, as the Bank of Canada adjusts interest rates to account for inflation, looking back over the past few decades shows that mortgage rates are still low by historical standards.
And it’s important to keep in mind that a lender’s advertised rate is only the beginning of the story. Your actual mortgage rate will be determined by your credit score and other personal financial factors.
Why it’s important to compare Alberta mortgage rates before applying
A mortgage is the biggest loan many Canadians will take out in their lifetime.
Keeping monthly mortgage payments manageable is key to living comfortably with such a large debt. The rate of interest charged to finance a home purchase, e.g the mortgage rate, has a huge impact on the total cost of your loan.
This is why it’s so important to shop around and compare Alberta mortgage rates before buying. Getting the lowest rate possible could mean saving a significant amount of money on the interest payments.
Of course, while knowing you’re getting a good rate is a huge part of why you want to compare Alberta mortgage rates, there is more to choosing a mortgage than just picking the option with the best rate.
You should also be mindful of fees, customer service offered by the lender, and any terms and conditions that might be associated with your mortgage. Every lender is different and what they will be able and willing to offer you as a potential client will differ as well.
How to compare Alberta mortgage rates across lenders
When it comes to comparing Alberta mortgage rates across lenders there is a lot to consider.
First, it’s important to look at the annual percentage rate, or APR. While the interest rate is a set percentage that a lender charges you to borrow money, APR includes the interest rate, fees and other closing costs that are set by the lender.
In ideal circumstances, the APR will be clearly listed when you’re shopping rates, but this isn’t always the case. If the APR is not listed, you can calculate it yourself using the following method.
- Divide total fees by the loan amount.
- Multiple the result by the number of days within a calendar year (365).
- Then divide the result by the total number of days in the loan’s term.
- Multiply the result by 100 and add the % sign.
For example, let’s say you have a loan amount of $500,000 at a rate of 3% interest and a loan term of 10 years. The loan fees are $10,000. Using the above calculation, your APR will be 3.38%.
APR gives you the most accurate idea of how much the mortgage will truly cost you, which makes it the ideal metric to use when comparing Alberta mortgage rates. However, when doing these calculations try to always compare the same type of mortgages, with similar terms and amortization periods.
Other aspects to consider and compare when looking for the best mortgage rates in Alberta include the following:
- Type of mortgage.
- Ease of application.
- Prepayment penalties.
- Customer service.
- Any other fees not included in the APR, such as the cost of a home appraisal.
How are Alberta mortgage rates determined?
Alberta mortgage rates fluctuate constantly and there are numerous factors that influence the rates, ranging from macro issues like the state of the global and national economy, to more individualized concerns, such as an applicant’s credit score.
The Canadian government, Banks and economy
The two main economic factors affecting mortgage rates are the Bank of Canada’s overnight rate (also known as the benchmark rate) and the bond market.
Bank of Canada’s overnight rate
Depending on the state of the economy in Canada, the Bank of Canada will raise or lower the overnight rate (also known as the policy rate). The BoC will raise the overnight rate when they want to slow inflation or lower it when inflation is not as much of a concern and they want to stimulate economic growth.
When the Bank of Canada raises their overnight rate, financial institutions will correspondingly adjust their prime rate. The current prime rate of the financial institution will play a large role in the interest rates you are offered when shopping around for a variable-rate mortgage in Alberta.
Bond market
Bonds are considered to be a stable investment and financial intuitions invest in government bonds to create a reliable profit flow. When interest rates rise, however, bond values decrease and banks may lose money. To offset this loss, banks raise interest rates on fixed-rate mortgages. The bond market does not affect the rate of variable mortgages, only fixed.
The type of interest you choose (fixed vs variable vs hybrid)
The type of interest you choose will also affect the mortgage rate you’re offered. With mortgages, there are three rate options: fixed, variable, or hybrid.
Fixed-rate mortgage
Fixed mortgage rates are when the interest rate stays the same for the entirety of your term, even when the market fluctuates. These rates tend to be higher than variable interest rates, but offer less risk and can provide a sense of security. A fixed rate can be a good choice for someone who is risk averse and prefers to have regular, predictable mortgage payments.
Variable-rate mortgage
Variable mortgage rates can increase or decrease throughout the length of your term, depending on your lender’s prime rate.. At a glance, variable rates often seem like the better deal because they are lower than fixed rates, and historically they’ve been known to save borrowers money over the length of their mortgage. However, those who choose variable mortgage rates need to be comfortable knowing that interest rates can increase, sometimes significantly, throughout the term. And when interest rates go up, the monthly payment on a variable-rate mortgage can become more expensive.
» MORE: The difference between fixed and variable-rate mortgages
Hybrid-rate mortgage
Another option is a hybrid mortgage, which is sometimes called a combination mortgage. For these mortgages, one portion of your mortgage is subject to a variable rate and the other portion is at a fixed rate of interest. This kind of mortgage can help moderate the impacts of fluctuating interest rates in a particularly turbulent or uncertain economy. It’s worth noting that hybrid mortgages do tend to be more difficult to transfer between lenders.
The mortgage term and amortization you choose
Your mortgage term and amortization period also both play roles in your Alberta mortgage rate. The mortgage term is the length of your mortgage contract, while the amortization period is how long it takes to pay off the entirety of your mortgage. At the end of each term, you will have the option to renew your mortgage for another term.
Mortgage term
The term is the length of time your mortgage contract is valid. In Canada, mortgage terms can run anywhere from six months to as long as 10 years.
Short-term vs long-term mortgages
Short-term mortgages are those that are five years or less, while long-term mortgages are those that are over five years. While shorter mortgage terms mean you need to renew your contract sooner, they can also provide flexibility. For example, you can choose between fixed or variable mortgage rates (most long term mortgages are fixed only). Plus, short-term mortgages often have lower interest rates than long-term mortgage rates.
Closed vs open mortgages
A closed mortgage means that once the contract and paperwork are signed, the conditions cannot be changed without paying a penalty fee for breaking the contract. For example, while most closed mortgages do have some prepayment options, they are capped up to a certain amount. Should you go over this amount in a closed mortgage, you will face prepayment penalties.
Since closed mortgages are locked-in, they often offer better rates than open mortgages, which don’t have any prepayment penalties. That being said, open rate mortgages may be a good option if you think you may be able to pay off your mortgage early.
» MORE: Understanding open and closed mortgages
Amortization period
A mortgage’s amortization period is the length of time it takes to pay off the loan in its entirety. The most common amortization period in Canada is 25 years. In fact, if your down payment is less than 20% of a home’s value, you’re not allowed to exceed an amortization of 25 years. If you can provide a down payment greater than 20% then you can have an amortization period of up to 35 years.
Some borrowers opt for the shortest amortization period possible, because it means paying less interest overall and potentially saving thousands of dollars.
Chances are that your mortgage will have multiple terms during the amortization period until you pay it off in full.
What happens at the end of your mortgage term?
When your mortgage term ends, you have several options: renew, refinance or replace.
If you elect to renew your mortgage, your lender will send you a renewal statement that contains details of your renewed contract, such as the term and interest rate. If all looks good, you simply sign the document and your mortgage will continue on seamlessly.
If, however, you’re not entirely happy with the new mortgage contract, because, for instance, you want a lower interest rate or a shorter amortization period, you could try to refinance your agreement to get more favourable terms.
You also have the option to compare mortgage rates again and go with a new lender. While you might get a better rate with a new lender, keep in mind that there may be additional costs, such as setup and appraisal fees.
Mortgage prepayment penalties
Open mortgages are free from prepayment restrictions, which means you can pay extra towards your principal anytime you like.
Closed mortgage contracts may allow borrowers a ‘prepayment privilege’ either to increase regular payments or make an annual lump-sum contribution without facing a penalty. However, borrowers who exceed this amount will likely face a prepayment penalty, which will vary depending on the lender and the terms of the contract.
For fixed-rate closed mortgages, prepayment charges are generally calculated as the higher of:
- Three months’ interest on the amount you prepay (calculated at your annual mortgage interest rate).
- The interest rate differential (IRD) on the prepaid amount (the difference between your interest rate and the financial institution’s current posted interest rate for a similar mortgage term).
For variable-rate closed mortgages, prepayment charges are generally calculated as three months’ interest on the amount you prepay.
Your down payment amount
The size of your down payment may affect your mortgage rate. The minimum down payment you’ll need depends on the purchase price of your home.
- For homes with a purchase price of $500,000 or less, the minimum down payment is 5%.
- For homes with a purchase price between $500,000 and $999,999, the minimum down payment is 5% for the first $500,000 and 10% for the amount above $500,000.
- For homes with a purchase price of $1 million or more, the minimum down payment is 20%.
In cases where borrowers are self-employed or have a low credit score, lenders may require a larger-than-minimum down payment.
While it might be surprising, it’s possible to get low mortgage rates in Alberta with a down payment of less than 20%. That’s because the smaller down payment would mean those homebuyers would have a high-ratio mortgage and would be required to get mortgage insurance, sometimes known as mortgage default insurance or CMHC insurance. Since the mortgage is insured, lenders face fewer risks, so they can offer lower rates to these borrowers.
Credit score and income
Another major factor that contributes to how Alberta mortgage rates are determined is your personal financial situation. Specifically, credit score and income.
Your mortgage lender wants to be as sure as possible that its money will be paid back on time. The stronger your financial profile and history, the less worried the lender will be that you might default on your loan and, therefore, you are likely to be offered better mortgage rates.
When it comes to credit scores for a mortgage in Canada you will want a 660 or above to access the best rates. That’s not to say that a person with a lower credit score won’t be approved for a mortgage. They just may have to pay higher rates or see out a private mortgage.
Income is another major consideration because lenders want to ensure that you can afford the mortgage loan they give you.
To determine this, you will have to do a mortgage stress test. This is a mandatory qualification test that mortgage applicants must take to prove they can afford the payments at the current qualifying mortgage interest rate: either the benchmark rate of 5.25% or your lender’s offered rate plus 2% – whichever rate is higher.
The test compares your income to your existing debts, as well as property costs and the proposed mortgage payments. To pass, you need a gross debt service ratio (GDS) of under 39% and total debt service ratio (TDS) under 44%.
What’s a “good” credit score?
Credit scores range from 300 to 900 in Canada. While there isn’t a magic number that determines whether you’ll qualify for financing, a higher score increases your odds of getting the mortgage you’re looking for at a favourable rate. Any number from 660 and up is considered a good score and is likely to get you approved for a mortgage, though each lender may have their own unique requirements.
What to know about credit scores if you’re new to Canada
If you’re new to Canada, you may need to build your credit score from scratch, which could take some time. While much of the work building a solid score is simply a matter of responsible fiscal management and patience, there are things immigrants can do to get a better credit score, such as applying for a secured credit card and paying bills on time.
Some lenders do offer newcomer mortgages that may allow little to no credit history. These loans are designed for those who have been in Canada for five years or less and have the required income for a home purchase.
How to qualify for the lowest Alberta mortgage rates
Alberta mortgage rates are determined by a variety of factors. Some, such as economic and bank factors, are out of the mortgage applicant’s control. However, mortgage seekers do have some control over other determinants, like credit scores and mortgage terms.
The best rates go to low-risk borrowers so it’s a good idea to boost your credit score as much as possible. The higher, the better. You also want to ensure that your debt service ratios are within the desired ranges. You can calculate both of these yourself to have an idea of where you sit. If you are over or on the cusp, then look to see what you can change before applying for a mortgage. The lower these scores are, the better chance you have at getting the lowest Alberta mortgage rates.
Is the lowest Alberta mortgage rate the best mortgage rate?
When it comes to Alberta mortgage rates, the lowest rate isn’t necessarily the best. Having the lowest APR is a great place to start, but there’s much more to consider before choosing your lender.
The best mortgage rates are generally for amortization periods of 25 years or less. Be mindful of your risk tolerance when choosing between fixed and variable mortgage rates.
If you know you are going to come into a lot of money soon (such as via an inheritance), consider getting an open mortgage, which will allow you to pay it off, penalty-free, faster.
In the end, there is no one mortgage that works for everyone. It’s about finding the best mortgage with the best rates and terms for your personal needs.
Use mortgage rates to estimate your mortgage payment
When starting to explore monthly mortgage payment options, having a current rate quote is a great way to calculate accurate estimates of what you can afford. For example, let’s say you are looking to borrow $500,000with an amortization period of 25 years and a fixed-rate five-year term.
If the interest rate is 3%, you will be paying $209,868.25 in interest on top of the $500,000 principal. This is a total of $709,868.25 over the course of 25 years.
Compare that to an interest rate of 4%, for which you would pay $289,030.31 in interest on top of the $500,000 principal. Bringing the total to $789,030.31. That’s a difference of $79,162.06 over the course of the 25-year amortization period.
NerdWallet’s Alberta mortgage payment calculator can help you compare the impact of interest rates on your potential monthly mortgage payment.
Frequently asked questions for Alberta mortgage rates
NerdWallet makes it easy to browse some of the best mortgage rates in Alberta, from top lenders that have partnered with Homewise. You can easily customize these mortgage rates by loan type, rate type and your location. The rates are updated daily by to provide you with the most accurate options each day.
Yes, it is possible to negotiate with lenders on mortgage rates and fees, though lenders are not required to entertain negotiations. To put yourself in the best position to negotiate a lower rate, have a strong credit score, excellent credit history and a sizable down payment.
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