What Determines Your Mortgage Finance Rate?

Posted on 17th July 2015

Everyone wants to get the lowest interest rate possible when getting a mortgage or refinancing. But how is your interest rate determined? And what happens if you have bad credit? There are a number of key factors that can affect your mortgage finance rate .

Factors That Determine Your Mortgage and Refinancing Rates

The Bank of Canada announced recently that it lowered its benchmark lending rate to 0.5%. It was the second time this year the central bank has dropped the rate to help kick-start the Canadian economy.1

The Bank of Canada’s overnight lending rate influences the rates commercial banks offer potential home buyers or those looking to refinance because it impacts their cost of borrowing. Banks tend to pass on any savings or costs to consumers.

Some of Canada’s big banks cut their prime mortgage rates to 2.75% immediately after the Bank of Canada said it would lower its lending rate. Just because the banks are advertising 2.75%, though, doesn’t mean that’s what every first-time home buyer will get.

In fact, many borrowers are surprised to find that the advertised rate is not necessarily the mortgage or refinancing rate they are offered. The fact is; mortgage and refinancing rates can vary day-to-day depending on a large number of factors. For example, a low credit score and high loan-to-value ratio will increase your mortgage rate. The loan size, type of home, and term length will also influence mortgage and refinance rates.

Credit Score

Your credit score is one of the first things lenders will want to look at when you apply for a loan or refinancing . Lenders price mortgages based on risk. The higher your credit score, the less of a risk you are for lenders and the greater the chances are you’ll pay your loan back on time.

Canada’s biggest credit companies use a scale from 300 to 900. To get the best mortgage or refinancing rate, many lenders want to see a minimum score of 680. Factors that negatively affect your credit score include high account balances, outstanding loans, late or skipped bill payments, even having too much available credit.


Lenders that offer prime mortgage and refinancing rates will still work with a credit score under 700. But you need to show that you have a dependable source of income.

Your mortgage rate will fluctuate based on whether you have a confirmed on non-confirmable income. Lenders prefer confirmable income; a full time job with regular pay. Prime lenders will also work with non-confirmable incomes, which is common among those who are self-employed or work on commission.

Down Payment

The higher your down payment as a percentage of the value of the home, the better. A larger down payment shows the bank you know how to save money. It also means you have more at stake in the property. The less you have to put down, the higher your mortgage rate.


If you’re refinancing, lenders will increase your mortgage up to a maximum loan-to-value ratio of 85%. The more equity you have in your home, the more prime lenders are willing to lend at a good rate since it’s backed by a secure asset.

Canadalend.com: The Country’s Mortgage and Refinancing Leader

There are a large number of factors that determine your mortgage and refinancing rate . If you’re looking to step on the property ladder or are interested in refinancing, the independent, licensed professionals at Canadalend.com can help you determine what kind of loan you qualify for. They will also help you get the best rates possible.

Whether you have bad credit, have been turned down by one of Canada’s big banks, applied for bankruptcy, or are self-employed, Canadalend.com can help you secure a residential mortgage or refinancing .

If you are interested in seeing what kind of residential mortgage or refinancing rate you qualify for, contact Canadalend.com or apply online and a mortgage specialist will help set up an appointment at your earliest convenience.


“Bank of Canada lowers overnight rate target to 1/2 per cent,” Bank of Canada web site; http://www.bankofcanada.ca/2015/07/fad-press-release-2015-07-15/

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