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Your Guide to Getting the Best Mortgage Rates in Victoria
Homeowners gravitate toward the relatively small town of Victoria. It’s especially popular with retirees looking for a mild climate and plenty of amenities. But high home values in the city have led to a competitive lending market, which means competitive rates in the market.
The capital of British Columbia, Victoria sits on the craggy southern end of Vancouver Island.
With abundant parkland, it’s known for outdoor activities. The city’s British colonial past shows in its Victorian architecture, including stately Craigdarroch Castle mansion. Butchart Gardens, with 55 acres of vivid floral displays, plus statuary, water features and a carousel, is one of many formal gardens in the city.
Victoria’s population is 385,999.
Learn About Rates And Mortgages in Victoria
If you’re thinking about buying a home in Victoria, it’s important to go into the process as fully informed as possible. Here are some frequently asked questions about Victoria mortgages to help get you started.
Why compare Victoria mortgage rates on nesto?
When you buy a home using a loan, you’re making a long-term commitment to repay that loan. Whether you stay in the home five years or 25, each month you’ll pay a portion of the loan amount plus interest. That interest rate can vary widely depending on the lender you choose.
But comparing rates can be a complicated process. Yes, you could look at the rates quoted on a lender’s site, but your actual rate will still vary based on your credit score, the home loan amount, and other factors. Nesto gathers some basic information and prices multiple lenders to help you find the best rate possible. This will increase your chances of getting that rate as low as possible to keep your payment affordable.
Are Victoria mortgage rates higher than other cities?
Although Victoria has no shortage of eager homebuyers, there are a couple of factors keeping interest rates low. High home prices mean lenders want the business that comes from loaning large sums of money. This competition means lenders have to keep rates low.
But like much of Canada, lower interest rates are an overall market trend, as well. The Bank of Canada has decided to keep rates low until at least later this year as the country waits for the economy to stabilize. This means now is a good time to get into a home, locking in a low rate for the next five years.
That said, although you’ll find rates in Victoria are lower than other areas, housing prices trend higher. That means you’ll end up paying more in interest, over time, than you would if you chose a comparable house in a more affordable area of British Columbia.
Should I get a fixed-rate or variable-rate mortgage in Victoria?
When you borrow money, you agree to repay the amount, with interest, during a term outlined in the agreement. With a mortgage, the interest you agree to pay can be fixed. This means it will remain the same rate for your initial term, which is usually five years.
There’s another mortgage type worth considering, though, and that’s a variable rate. With a variable-rate mortgage, you’ll usually see a lower interest rate up front, but that rate can go up and down with the market. If you’re not absolutely positive that you’ll remain in your home for those first five years, a variable rate will likely be better because you can generally exit the mortgage without penalty if you have a variable rate. A fixed rate requires you to pay for the full five years.
About the Victoria Housing Market
Victoria’s housing market has somewhat stabilized after a turbulent couple of years. The COVID-19 pandemic ushered in an era of low supply when it came to housing, while demand remained strong. Interest rates hit historic lows during this period, pushing many homebuyers to consider a move. But those interest rates are expected to rise in the future, which could help bring demand down a little.
However, historically high housing prices have pushed some homebuyers out of the market for now. In early 2022, the average home price exceeded $1 million for the first time, at $1.2 million. This is due in large part to an increase in luxury home sales in the area.
Victoria Closing Costs
Before you can pack your belongings and load up the moving truck, you’ll have to complete some legal paperwork. As a homebuyer in British Columbia, you might find these costs higher than you’d pay elsewhere solely because home costs are so high. The $8,000 property transfer tax on a $500,000 house, for instance, would be $18,000 on a home that costs $1 million or more.
But if you are lucky enough to land a home priced at $500,000, the closing costs will largely be in line with what you’d pay elsewhere in British Columbia. The home inspection fee might be a little higher, but you can price around and try to reduce those costs.
Your lender will verify in advance that you have the funds necessary to cover your closing costs, in addition to the down payment you’ll owe. Prior to closing, you’ll need to transfer the funds as directed. Usually lenders have you wire the fees to an escrow company that handles ensuring the money goes where it’s intended.
|Type of cost||Rate ranges||Estimated cost (based on $500,000 home)|
|Realtor commissions*||3%-7% of purchase price||$15,000-$35,000|
|Home inspection fee||Flat rate||$400-$500|
|Property transfer tax||1% for first $200,000; 2% on remaining amount up to $2 million||$8,000|
|Legal fees||Flat rate||$1,000-$1,500|
*Realtor commissions are usually paid by the seller.
Altogether, you can expect to owe between $9,400 and $10,000 at closing as the buyer, assuming your home costs $500,000. If your mortgage amount is higher, you should adjust the property transfer tax rate accordingly to find the exact amount you’ll owe. In most cases, sellers cover the real estate agent commissions, but this can sometimes be negotiated before your offer is accepted.
Victoria first-time homebuyer rebates
Before you panic at the cost of buying a home in Victoria, there’s a way to get relief. If you’re a first-time homebuyer or you have a retirement savings plan, there’s a rebate and tax credit that can help. If you’re buying a new or newly renovated home, you might qualify for a tax credit for the property tax on your purchase.
- RRSP Home Buyer’s Plan: Canadians with registered retirement savings plans might be able to withdraw up to $35,000 from that plan to cover the cost of homebuying.
- First-Time Home Buyer’s Tax Credit: If this is the first home you or your partner has bought in the past five years, you might qualify for up to $5,000 in tax credit. Simply claim the credit when you file this year’s taxes.
- GST/HST: The goods and services tax can be overwhelming on a Victoria home purchase. If you’re buying a newly built or newly renovated home, check to see if you qualify for the GST/HST new housing rebate.
Victoria Mortgage Brokers
Looking to buy in Victoria? It’s best to speak to someone who understands the market to help you navigate mortgage rates in this city. Don’t hesitate to submit an application online and one of our advisors will be happy to help you find the best product for your needs.
What Affects My Mortgage Rate in Victoria?
Each lender sets its own rates, which are based on the current market. However, the rate you pay will differ from the rate some other borrowers pay at the same lender. That’s because the lender conducts a risk assessment that looks at your creditworthiness and income, among other factors. Here are a few things that will affect your mortgage rate in Victoria.
Before a lender will agree to loan you hundreds of thousands of dollars or more, you’ll need to agree to put some money down toward the purchase of the house. This will be due at closing, but you’ll typically be required to prove you can pay it before loan approval.
In British Columbia, lenders require at least 5% down on a home with a purchase price up to $500,000. But in Victoria, chances are, you’re looking at a more expensive place. If the cost of your home is under $1 million, you’ll need a down payment of at least 10%, but for homes of $1 million or more, your down payment will have to be 20%.
Victoria’s mortgages are divided into two phases. The first phase is a term in which you pay either a fixed-rate or variable interest rate based on what you agree. This term is usually only five years.
At the end of your term, your lender will look at the amount remaining on your principal and set a rate based on how long it will take for you to repay the full loan. This is the amortization period and, most of the time, is limited to 25 years. You’ll continue to pay on that loan until you sell it, refinance it, or pay it off in full.
When you apply for a mortgage, you might be asked whether this will be your primary residence. This is what’s known as an owner-occupied property, and it’s the most common type of property usage Canadian lenders see. If you purchased a home to rent, you’d be requesting a mortgage for a tenant-occupied property and might need to meet stricter credit scoring standards than you would if the home was your primary residence.
A third, less-requested type of mortgage is vacant land. If you were a developer thinking about building a new subdivision, you might request this type of mortgage. But you could also mortgage vacant land as an investment or in the hopes of building a home there someday.
There are different types of mortgages you’ll need to choose between when you’re approaching lenders. One of the most important questions you’ll be asked is whether you want an open or closed mortgage. An open mortgage lets you pay off your mortgage or make early payments as you want. This freedom comes at a cost, though. An open mortgage generally has higher rates than a closed mortgage, which locks you in. You might be able to make some prepayments, but these could be limited or even come with penalties.
Your Credit Score
Lender requirements for credit scores can vary, but scoring requirements are stricter than ever. In 2020, the Canada Mortgage and Housing Corporation increased the minimum credit score requirement from 600 to 680. This could make it tougher to get a mortgage in Victoria. If you’re part of a couple, though, your significant other’s credit score could be used instead of yours. If not, as long as your score is 600 or better, don’t rule out the possibility. If you can, though, it will only help your rates to take some time to strengthen your score.
How to Apply for a Mortgage in Victoria
Today, you don’t even have to leave the house to apply for a mortgage. You can compare rates and get prequalified, all from the comfort of your home. Still, it helps to be aware of the process involved before you get started.
Meet with a mortgage expert
You don’t have to meet with a mortgage expert in person to kick off the application process. In fact, you can get a quote and preauthorization letter completely online. But meeting with a mortgage expert can help you fully understand the amount of home you qualify for and the differences in the various mortgage types.
Acquire all necessary documents
A lender can’t afford to just take a borrower’s word on employment, income, debts, and other pertinent information. You’ll need to provide documentation that assures the lender you’re going to be able to repay the loan. You’ll probably be asked to provide pay stubs or, if you’re self-employed, tax filings for two or three previous years. You might also be asked for bank statements and copies of court judgements. You’ll need to be able to easily access this information upon request.
Apply for mortgage financing
The best thing you can do is get prequalified before you start home shopping. If you’ve done that, you’ll merely need to continue the application process with the lender that prequalified you. You don’t have to stick with that lender, though. If you’ve found a better rate elsewhere, you can always start the application anew with that lender. Keep in mind that prequalification typically doesn’t impact your credit score, but a full application will.
Sign & finalize your mortgage
Once your financing is in place, your real estate agent will arrange a closing date. As that date approaches, your lender will make sure all the paperwork is in place to finalize your loan. On the chosen date, you’ll meet with a representative of the lender, as well as your real estate agent, to sign all the documents. This will transfer the property from the seller to you and free you to move in.
How nesto Works
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