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Your Guide to Getting the Best Mortgage Rates in Vancouver

The City of Vancouver carries the highest average for home prices in Canada, and causally has the biggest required down payments in the country. This is mainly due to Vancouver’s high-priced homes that are not insurable by CMHC, due to the $1 million federal cap on insured mortgages. The city’s large foreign home buyer segment also tends to make larger than average down payments. The consequences of the most recent federal mortgage rule changes are having their desired effect, according to the Finance Minister. As a result, Vancouver is one of two Canadian cities (can you guess the 2nd?) that is experiencing the greatest “cool-down” of home prices thus far, which has been amplified to the $1m+ range. But this followed a year that saw double-digit-percent increases across all housing prices, so the demand is only just now coming out of a big pandemic-era surge. With a decrease in the number of properties on the market, though, supply issues are likely to only continue to keep prices high.

About Vancouver

Vancouver is British Columbia‘s largest city and the Greater Vancouver Area ranks as the third largest metropolitan region in the country. Vancouver is also Canada’s most densely populated city with approximately 5,249 people per square kilometre, and more than half of its residents are fluent in a language other than English.

Due to its magnificent integration with the surrounding natural landscape, Vancouver is consistently ranked among the world’s most livable cities. It’s no surprise that Vancouver’s tourism industry is the second biggest contributor to the city’s local economy.  🌄

Learn About Rates And Mortgages in Vancouver

If you’re in the market for a home in Vancouver, you can save a little money by shopping around for the best mortgage rates. Here are some answers to a few frequently asked questions that can help you enter the process fully informed.

Why compare Vancouver mortgage rates on nesto?

Comparison shopping is the best way to get a good price on any product. That is especially relevant to mortgages, since it’s a multi-year commitment to buy an extremely expensive item. But some lenders won’t give you a precise rate until you’ve completed an application, and that time-consuming process might lead you to limit your research to a few.

Nesto gives you one place where you can find your best rate. You’ll just answer a few questions and review your rates.

Are Vancouver mortgage rates higher than other cities?

As the most populous city in Canada, Vancouver has a large homebuying market. In recent years, that’s become a problem as demand has overshot supply. In fact, Vancouver currently has the lowest vacancy rate of any Canadian city. This drives housing prices up and makes it tough for homebuyers to get the home they want in the price range lenders are willing to let them borrow.

When making lending decisions, lenders weigh the risk of loaning funds to a particular applicant. Homebuyers with higher credit scores tend to be less of a risk, historically, than those who have less-than-average scores, so priority will go to those who meet the minimum score requirement. Even at that, though, lenders will often give a lower interest rate to those lower-risk borrowers in order to get their business.

But before you even apply for a mortgage, a lender has a minimum mortgage rate based on the current market. The Bank of Canada plays the biggest role in what current rates are, but Vancouver lenders will also look at competition. Even online lenders need to stay competitive with brick-and-mortar Vancouver lenders, so rates might be lower simply due to there being more lenders competing for Vancouver’s large customer base.

Should I get a fixed-rate or variable-rate mortgage in Vancouver?

There are two types of mortgages a Vancouver homebuyer will see when pricing rates. One is a fixed-rate mortgage, which sets a percentage you’ll pay in interest for the full initial term of your loan. This term is typically five years, so that means you’ll pay that rate for all 60 monthly payments.

Then there’s the variable-rate mortgage, which, as the word suggests, can vary from one month to the next. This is based on the market rate, so if interest rates see a spike during your five-year term, your payment will increase along with it.

A fixed-rate mortgage keeps things simple for your monthly budget. You’ll be able to predict, in advance, how much you’ll owe each month. There’s also a peace of mind in knowing that you’re protected against interest rate fluctuations. But a fixed-rate mortgage locks you in for five years, which means if you need to sell your home, you’ll have to pay a penalty.

About the Vancouver Housing Market

The housing market in Vancouver is booming. With an average MLS home price value of $1,477,226; Vancouver is the most expensive city to buy a home in Canada. In fact, Capital on Tap designated it as the third most expensive city to buy a home in the world.

The city of Vancouver is facing a significant gap between its residents’ incomes and home values. In order to keep homebuyers from taking on risky levels of debt, the Canadian banking regulators introduced the Stress Test in 2018. This resulted in reduced buying power that changes what first-time homebuyers can purchase. New rules went into effect in 2021 that make it even harder, increasing the qualifying rate for those homebuyers.

Vancouver Closing Costs

Purchasing a home comes with some legal risks, so you, your lender, and the seller will need to sign some documents to finalize your purchase. These documents also cover the funds you’re borrowing to buy the home. Once a seller accepts your offer, your real estate agent will set a closing date and, on that day, you’ll meet with your agent and a representative from the mortgage lender to sign a stack of papers.

Transferring a home from the hands of a seller to you will bring fees, of course. The biggest expense at closing will be your down payment, which goes toward the principal of the home you’re buying. Lenders will require a down payment of 5% to 20% of the purchase price. As Vancouver’s housing prices have continued to rise, even 5% can seem like a more daunting number, though. It’s also important to note that if you don’t put at least 20% down, you’ll pay mortgage insurance, which adds between 2.8% to 4% to your mortgage amount.

At closing, your down payment isn’t the only money you’ll owe. You’ll also need to transfer funds to the escrow company or closing attorney for the closing costs. In Vancouver, those costs can vary depending on the purchase price of your new home.

Type of costRate rangesEstimated cost (based on $500,000 home)
Realtor commissions*3%-7% of purchase price$15,000-$35,000
Home inspection feeFlat rate$300-$500
Property transfer tax1% for first $200,000; 2% on remaining amount up to $2 million$8,000
Legal feesFlat rate$1,000-$1,500

*Realtor commissions are usually paid by seller

Lenders will usually order an appraisal before closing. This helps protect their investment by ensuring the amount you’re borrowing for the home is in line with its market value. The lender will generally cover this fee, which saves you about $250-$350 on an amount you’d be responsible for if you were paying cash for the home. However, if your lender doesn’t require an appraisal, it’s worth considering paying for this yourself, as it helps protect your own investment in the property.

Vancouver first-time homebuyer rebates

While it’s certainly not inexpensive to buy a new home in Vancouver, there is relief available for some buyers. Whether you’re buying your first home or your tenth, there are programs that can help you cover some of those initial costs. Here are three programs to review to see if they apply to your circumstances.

  • RRSP Home Buyer’s Plan: Vancouver homebuyers participating in a registered retirement savings plan might qualify to withdraw funds from that plan to pay the costs to purchase a home. You can only withdraw up to $35,000, but this could be a way to offset some of the expense.
  • First-Time Home Buyer’s Tax Credit: If you or your partner haven’t owned a home this year or in the preceding four years, this tax credit can take care of some of those costs. You’ll claim this as a $5,000 tax credit on the return covering the tax year in which you closed on the house.
  • GST/HST: Like all Canadians, Vancouver residents pay a goods and services tax on owned property that includes homes. Although British Columbia’s tax is lower than some other provinces, a 5% tax on a large purchase can still be overwhelming. For that reason, residents who purchase newly built or renovated homes may qualify for a rebate on that tax.

Vancouver Mortgage Brokers

Looking to invest in Vancouver?  It’s best to speak to someone who understands the market to help you navigate mortgage rates in this city. Don’t hesitate to book a call with us, our agenda is always up to date. 🌈

What Affects My Mortgage Rate in Vancouver?

Before you even think about buying a home, there are factors in place that will influence the interest rate you pay. Some of those relate to the overall market in Vancouver, some are specific to your own finances, and still others have to do with the type of home you’re buying. Here are the top things influencing your Vancouver mortgage rate.

Down Payment

Before agreeing to cover your home purchase, your lender will want to know how much stake you plan to have in the purchase. This stake is in the form of a down payment. You’ll put a percentage down at closing and the lender will cover the rest.

Down payment requirements can vary by lender, but the minimum you can expect to put down on a home purchase of less than $500,000 is 5%. For a home priced at $500,001 to $999,999, you’ll be required to have at least 10%. Home purchases over $1 million require at least 20% down. No matter the price of the home, though, putting 20% down is always best if you can swing it. If you put less than 20% down, you’ll have to pay for mortgage default insurance, which will up your mortgage cost by 2.8% to 4%.

Amortization Period

Your Vancouver home loan will come with an initial five-year term. During this five-year period, you’ll make payments, along with interest, based on the terms you agreed on when you signed your contract.
At the end of this initial five years, your lender will issue a new interest rate based on the time remaining to pay off your loan. This is the amortization period, and it maxes out at 25 years. You’ll make monthly mortgage payments during the amortization period until you sell the home, refinance your mortgage, or pay off the loan in full.

Property Usage

Most Vancouver homebuyers are purchasing a home to serve as a primary residence. This is known as an owner-occupied property for mortgage purposes. An owner-occupied property is lower risk to the lender since you’ll be there, taking care of it, while you’re repaying the loan.
If you purchase a home to rent to others, this is known as a tenant-occupied property. Getting a loan for this type of property can be a little more challenging, but you can reduce the risk to the lender by making a big down payment and having a stellar credit history. Property that does not yet have a building on it is known as vacant land. Developers and individual homebuyers might take a mortgage to purchase this type of land with the intention of building on it.

Mortgage Type

In addition to fixed or variable interest, you’ll also need to choose between a closed or open type of mortgage. The differences between the two are similar to your interest rate options in that one, a closed mortgage, locks you in for that initial five-year term, while the other, an open mortgage, is subject to fluctuations in interest rates.
The biggest reason to go with an open mortgage is its flexibility. Not only can you potentially sell the home without penalty, but you also can make payments on it to reduce your principal. However, lenders will often let you make prepayments without penalty. You’ll simply be limited in how much you can pay early. Read the terms of any loan you choose closely before signing on the dotted line.

Your Credit Score

Your credit activity is regularly monitored by the two major Canadian reporting agencies, Equifax and TransUnion. Your past activity is expressed as a FICO Score, which is used by lenders to assess the risks associated with lending you a large sum of money to buy a house.
Generally speaking, you’ll need a credit score of 650 or better to qualify for a loan. This can vary by lender, but the higher the number, the better your chances. Lenders also base the interest rate they quote on your creditworthiness, and your credit score, in addition to your debt-to-income ratio and employment history, can help determine that.

How to Apply for a Mortgage in Vancouver

Once you’ve decided to get serious about buying a home, it’s time to start researching loan options. You should first shop around and learn as much as possible about going interest rates for your credit score and home purchase price. Once you’ve narrowed it down to your ideal lender, here are the steps to take.

Meet with a mortgage expert

The best first step once you’ve chosen a lender is to get preapproved for a loan. This will help you determine exactly how much home you can afford. Once you’ve found a home and the seller has approved your offer, you’ll be ready to put your loan in place. You can usually continue the application online, but a mortgage expert can also meet with you to walk you through the process and answer any questions.

Acquire all necessary documents

Your lender will want documentation that shows you’ll be able to pay the loan each month. This is where you’ll have to back up any debt and income statements you completed earlier in the application process. You’ll probably need to upload pay stubs or, if you’re self-employed, tax records, and bank statements to show your regular monthly debts. Your lender may contact you several times before closing to ask questions and request additional documentation.

Apply for mortgage financing

Even if you were preapproved, this was only a preliminary part of the process. In addition to providing documentation, you’ll have to complete a more extensive application that seeks to learn more about your debts and your sources of income. If you were preapproved, this should be a fairly seamless process. If you weren’t, this is where you could hit a snag if your credit score or debt-to-income ratio aren’t in line with the requirements for the amount you’re asking to borrow.

Sign & finalize your mortgage

Your home purchase will conclude with something known as a “closing.” This is where you’ll sign all the documentation necessary to transfer the home to your name and get the financing you need to pay for it. This is the most intensive part of the process, but it’s also the most exciting. Once you’ve finished signing, you’ll be ready to move into your new place.

How nesto Works

We offer all the help of a mortgage broker, without the commission. Simply put, our salaried mortgage advisors are rewarded based on your satisfaction. We’re here to help you reach your goal and guide you through the complicated world of home financing. #yesyoucan #empowermentisthenewsexy

Every mortgage professional knows the market’s best rates every time they check their email. Only a few of them will give you that rate without making you work for it. nesto’s here to change the industry for this very reason. You always get the best rate upfront with nesto.