Can Mortgage Rates Be Negotiated in Canada?

When it comes to securing or renewing a mortgage, many Canadians overlook a crucial step—negotiating their mortgage rate. It’s a common misconception that the rates posted by lenders are set in stone, but in reality, there’s often room for negotiation. Whether you’re applying for a new mortgage or renewing an existing one, learning how to negotiate effectively can save you thousands of dollars.

Here’s everything you need to know about negotiating mortgage rates in Canada, including the best strategies to secure a lower rate.

When Should You Negotiate a Mortgage Rate?

There are three key moments when negotiating your mortgage rate can work in your favour:

1. When Applying for a New Mortgage
   Competition is fierce among lenders for new clients, making this the best time to negotiate. Shop around, compare offers, and see if your preferred lender is willing to match or beat competing rates.
2. When Renewing Your Mortgage
   When your mortgage term ends, your current lender will send a renewal offer. Instead of accepting it immediately, research current rates and negotiate for better terms. Switching lenders could save you significantly.
3. When Rates Are Dropping
   If mortgage rates drop mid-term, you may be able to refinance for a lower rate. Be sure to account for any prepayment penalties when considering this option.

Six Strategies to Negotiate a Better Mortgage Rate

1. Understand Posted Mortgage Rates

Posted mortgage rates are often higher than what most borrowers end up paying. Think of them as a starting point for negotiations. Lenders frequently offer discounted or "special" rates, so don’t hesitate to request a better deal.

Tip: Check for current discounted rates and ask your lender to match them. This signals that you’re informed and unwilling to settle for the posted rate.

2. Shop Around for Competitive Rates

Comparing mortgage rates from different lenders is a simple yet effective way to ensure you’re getting the best deal. Even a small difference in rates can lead to significant savings.

For example, the difference between a 5% and 5.5% fixed rate on a $375,000 mortgage could save you around $9,400 over a five-year term. Use online tools or contact lenders directly to gather quotes and negotiate based on the lowest offer you find.

3. Ask for a Better Rate

Sometimes, the easiest way to secure a better rate is simply to ask. Even if you’re offered a discounted rate, ask your lender, “Is this the best you can do?” Lenders may have room to improve their offer, especially if they know you’re considering other options.

4. Work with a Mortgage Broker

If negotiating directly with lenders feels overwhelming, consider enlisting a mortgage broker. Brokers work with multiple lenders to find the best rates and terms for your situation. They’re especially helpful for borrowers with unique circumstances, such as self-employment or credit challenges.

Why Choose a Broker? Brokers are paid by lenders, not borrowers, so their services are typically free for you.

5. Improve Your Credit Score

A strong credit score can give you significant leverage in negotiations. Lenders are more likely to offer favourable rates to borrowers who present minimal credit risk.

To improve your credit score:

• Pay off outstanding debts.
• Ensure timely bill payments.
• Avoid taking on new debt before applying for a mortgage.

A larger down payment or stable income can also strengthen your case when negotiating with lenders.

6. Monitor Interest Rate Trends

Stay informed about market trends, as timing can make a big difference. For instance:

• If you’re on a fixed-rate mortgage and rates drop, ask your lender about a "blend and extend" option to reduce your rate.
• If you’re on a variable-rate mortgage and rates are rising, consider switching to a fixed-rate mortgage to lock in a lower rate.

Being proactive and vigilant can help you take advantage of fluctuations in the market.

Key Takeaway

When it comes to mortgage rates, the first offer is rarely the best. By shopping around, asking questions, and negotiating strategically, you can secure a rate that aligns with your financial goals. Even small reductions in your interest rate can lead to substantial savings over the life of your mortgage.

Ready to Secure a Better Mortgage Rate?

Wilson Mortgage is here to help. As Canada’s trusted mortgage broker provider, Wilson Mortgage offers commission-free services and access to competitive rates. Whether you’re applying for a new mortgage or renewing your current one, we’ll guide you through the process to ensure you get the best deal possible.