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Guide to comparing mortgage rates in Ontario
The Ontario 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 Ontario 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 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. The actual mortgage rate you’re offered will be determined by your credit score and other personal financial factors.
Why it’s important to compare Ontario mortgage rates before applying
A mortgage is the largest loan most people get in their lives. That’s why comparing the best mortgage rates in Ontario is essential before choosing a lender. Even a slight difference in rates can end up saving — or costing — you thousands or tens of thousands of dollars over the life of your mortgage.
While it’s easy to focus on finding the lowest rate, that shouldn’t be the only factor you consider. Other mortgage features such as prepayment options, insurance, amortization, and term all affect how much you’ll pay in the long run, so it’s important to compare these factors in addition to looking at rates.
How to compare Ontario mortgage rates across lenders
When evaluating mortgages, you’ll want to look at the different lenders and what they’re offering to make sure you’re comparing apples to apples.
It’s crucial to compare annual percentage rates and not just interest rates. 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.
Ideally, lenders will publish APRs in addition to interest rates, but if they don’t, APR can be calculated by hand:
First, divide total fees by the total loan amount.
Then, multiply the result by the number of days in the year.
Next, divide that result by the total number of days in the loan’s term.
Finally, multiply that result by 100 and add a % sign.
Looking at the APR will give you a more accurate idea of the true cost of your mortgage. Here’s an example:
- Lender A: Offers a 5-year fixed mortgage with a 3% interest rate and 3.25% APR.
- Lender B: Offers a 5-year fixed mortgage with a 3% interest rate and 3.175% APR.
If you compare the above mortgage offers based on interest rate alone, there’s no difference. But by also examining APR, you can see that Lender B is charging lower fees, meaning the second mortgage offer is actually the better deal.
Whether you’re applying for your first mortgage in Ontario or renewing your current loan, you should also compare the following:
- Type of mortgage. You’ll pay a premium for a fixed-rate mortgage, but your payments won’t change over your term. With variable-rate mortgages, you’ll typically get a lower interest rate, but it may change based on the Bank of Canada’s overnight lending rate. The changing rate means your payments can go up or down during your term.
- Length of term. Most mortgages have 5-year terms. Shorter terms may come with lower interest rates, whereas longer terms typically have higher rates.
- Amortization period. The amortization period is the length of time over which your loan interest is calculated. The longer your amortization period, the lower your monthly payments, but you’ll pay more interest overall.
- Prepayment options. Some mortgages allow you to make additional payments each year. This gives you the option to pay off your mortgage faster if you come into extra funds, such as a bonus from work. Mortgages that don’t have any prepayment options will usually have lower interest rates.
- Open or closed. With open mortgages, you can pay off the entire amount at any time. However, for this privilege, you’ll be charged a higher interest rate. Closed mortgages may have prepayment options, but they’ll come with restrictions.
While the above are the most common things to compare when shopping for a mortgage in Ontario, you should also consider a few additional features:
- Customer service. Look into how easy it is to contact customer service at each lender and how helpful the representatives are. Major lenders with retail branches will give you access to someone you can talk to face-to-face, whereas smaller lenders may only offer service over the phone.
- Digital features. See what digital tools each lender offers. Do they have a site where you can check your current mortgage balance? Can you make prepayments online or do you have to mail in a cheque? Do they have mortgage calculators to show you how prepayments will reduce the amount of time it takes to pay off your mortgage?
- Prepayment penalties. When paying off your mortgage early (or switching lenders), you’ll often be charged a fee if you exceed your prepayment privileges. Some lenders use the interest rate differential, or IRD, which can work out to a large amount, whereas others charge a flat fee equal to 3 months’ interest on what you still owe. Make sure you understand the potential penalties before choosing a mortgage.
How are Ontario mortgage rates determined?
Mortgage rates in Ontario and across Canada are determined using a combination of factors such as the global economy, government rates, lender policies, and your personal financial situation. That’s why every lender has slightly different mortgage terms and why two applicants might be offered different mortgage products from the same lender.
Government, banks, and the economy
The Bank of Canada (BoC) uses monetary policy to set the overnight rate — the interest rate financial institutions charge each other for lending.
The BoC often lowers interest rates when the economy isn’t doing well. This makes money cheaper to borrow, which encourages people to spend. When inflation is on the rise, the BoC may increase rates to keep it under control. When interest rates rise, many people will often slow their spending and start to save instead.
The overnight rate affects variable-rate mortgages. That’s because financial institutions use the overnight rate to determine their own prime rates, which they use to set rates for variable-rate mortgages.
For example, if a bank is offering a variable-rate mortgage at prime – 1 and its prime rate is 4%, the interest rate at the start of this mortgage is 3%. If the prime rate changes during the term of your mortgage, your interest rate would also change — as would your mortgage payment.
Fixed-rate mortgage rates are most influenced by the bonds issued by the Canadian government, not the Bank of Canada’s overnight rate. That’s why you may see fixed mortgage rates increase or decrease even when there’s been no change to the overnight rate. Generally, when bond rates are higher, fixed rate mortgages will be lower.
The type of interest you choose (fixed vs. variable vs. hybrid)
The two most popular types of mortgages available to Canadians are fixed rate and variable rate. Each one has its benefits and drawbacks, so it’s important to understand how they work before you choose one.
As the name implies, fixed-rate mortgages give you a set interest rate that doesn’t change during the term of your mortgage. A fixed rate is ideal for people who want to know exactly how much they’ll pay and prefer stability in their budgets. In exchange for this peace of mind, fixed-rate mortgages usually have higher interest rates than variable-rate mortgages.
With variable-rate mortgages, the amount of interest you’ll pay can change over the course of your mortgage term. While some people don’t like the instability this can create in their monthly and annual budgets, a variable-rate mortgage could end up saving them more money compared to a fixed-rate mortgage. That’s because variable-rate mortgages generally start with lower interest rates compared to fixed-rate mortgages. If the BoC reduces the overnight rate, your mortgage interest rate will also decrease, saving you even more money over time. However, the opposite is also true. If interest rates rise, so will the rate on your mortgage.
In some cases, your monthly payment on a variable-rate mortgage won’t change. If the interest rate increases, your lender will apply more of your payment to interest costs. If the interest rate decreases, more of your payment will go towards the principal. However, some lenders offer variable-rate mortgages with adjustable payments, where changing interest rates could mean changing mortgage payments.
» MORE: How to choose between fixed and variable-rate mortgages
What many people don’t realize is that there’s a third mortgage option: hybrid mortgages. In this case, your mortgage is split into two portions, one with a fixed rate and the other with a variable rate. You get to choose how it’s split, but many people go with the 50/50 approach.
A hybrid mortgage can be a good option for people who are torn between a fixed and variable mortgage or concerned about future rate fluctuations. While they can be an appealing choice, hybrid mortgages can be a pain to deal with at renewal. They need to be refinanced, which comes with legal fees. Because the fixed and variable portions can have different terms, hybrid mortgages are also difficult to transfer to different lenders and may result in prepayment penalties.
The mortgage term and amortization you choose
Your mortgage term and amortization period will also directly affect the amount of each payment. While mortgage terms can last from a few months to 10 years, most Canadians choose a 5-year mortgage term.
Shorter terms will typically come with lower interest rates, whereas longer terms will bring higher rates. That’s because you’re paying for the extra security of maintaining a fixed rate for the length of the term. You’ll be able to budget more easily, knowing exactly how much you’ll need for each payment and how much you’ll owe on your mortgage by the end of the term.
The amortization period is the total amount of time it will take to pay off your mortgage. If you make a down payment of less than 20% of the home’s purchase price, you’ll have a high-ratio (or insured) mortgage, which means the longest amortization period you can get is 25 years. If you make a down payment of 20% or more, you have a low-ratio mortgage and you can get a mortgage amortization period of up to 30 years.
A longer amortization period will spread out your payments over a longer time, which means each payment will be smaller. However, you’ll pay more interest overall compared to a mortgage for the same amount with a shorter amortization period.
What happens at the end of your mortgage term?
Your term and amortization are outlined in your mortgage agreement. When your term ends, you will renegotiate, renew, or refinance your mortgage with a new term and possibly a new lender. When you do so, you’ll typically shorten your amortization period by the amount of time in the term you just completed.
For example, say you’re about to finish your first mortgage term of 5 years. If that mortgage had a 25-year amortization period, you’d usually renew or refinance to a new 5-year term with a 20-year amortization period.
Mortgage prepayment penalties
Some mortgages, known as open mortgages, have no prepayment restrictions, which means you can pay extra towards your principal anytime you like.
This strategy helps you pay down your mortgage faster and save on interest costs. However, open mortgages typically come with higher interest rates than closed mortgages, which restrict your ability to prepay.
For example, some closed mortgage contracts might state that you can only make a lump-sum payment toward the principal once a year, and that it can’t be more than 20% of your initial mortgage amount. Exceeding the terms of your closed mortgage contract will result in prepayment penalties.
How prepayment penalties are charged varies from lender to lender. Many lenders charge three months’ worth of interest when you break a variable-rate mortgage. Breaking a fixed-rate mortgage contract can cost you more because lenders often use the greater of three months’ interest or an amount based on the Interest Rate Differential, or IRD.
The prepayment fee method used by your lender should be clearly described in your mortgage contract. Make sure you understand it before accepting a mortgage agreement. It’s also a good idea to reread it before making any prepayments.
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%.
While it might be surprising, it’s possible to get low mortgage rates in Ontario 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.
However, the borrower pays for mortgage default insurance, which ranges from 0.6% to 4.5% of your mortgage amount. So while your mortgage interest rate itself might be lower than if you’d saved a larger down payment, once you consider the cost of mortgage insurance, you may not be saving money compared to if you had an uninsured mortgage. Note that you can’t get mortgage insurance if you’re buying a home that costs more than $1 million — you will need to put down 20%.
Saving up a down payment of 20% or more also gives you more equity in your new home, which is ideal for people who don’t like having too much debt or who plan to take out a home equity line of credit (HELOC). In addition, it may help you qualify for a larger mortgage amount and potentially have lower mortgage payments.
Credit score and income
Your credit score is a number between 300 and 900, as calculated by the two credit bureaus in Canada: Equifax and TransUnion. The higher your score, the more creditworthy you are in the eyes of lenders.
Every Ontario mortgage lender has different requirements when approving applications, but most lenders will want you to have a minimum credit score around 660.
Generally, if your credit score is good to excellent (660 or above) you’ll have a chance to qualify for low mortgage rates in Ontario. It is possible to get a mortgage with a low or “bad” credit score, but you may have to go with an alternative lender that will charge you a significantly higher interest rate.
Your income will also determine how much of a mortgage you’ll qualify for. The higher your income, the larger the amount you may be approved to borrow. However, Ontario lenders will also consider your debt ratios to determine how much mortgage to approve.
Your gross debt service ratio, or GDS, which incorporates all housing expenses, shouldn’t exceed 32% of your gross annual income. In addition, your total debt service ratio, or TDS, which adds other debt such as student and consumer loans to your GDS, shouldn’t exceed 40% of your gross annual income.
» MORE: Understanding debt service ratios
What to know about credit scores if you’re new to Canada
To be considered creditworthy by potential lenders, you’ll want to aim for a credit score of at least 660. If you’re new to the country, your previous credit score is unlikely to come with you.
This means you may have to rebuild your score from scratch so it may take time to build sufficient credit for a large loan like a mortgage.
While much of the work to get a better credit score is simply a matter of responsible fiscal management and patience, there are things you can do to start credit building, such as applying for a secured credit card and always paying your bills on time.
The mortgage stress test
In addition, anyone getting a home loan must pass the mortgage stress test to demonstrate that they’ll be able to afford their payments even if interest rates increase. For the stress test, the lender will calculate your GDS and TDS using a mortgage rate of either 5.25% or the rate you’ve been offered plus 2% — whichever is higher. Because it uses a higher rate for its calculations, the stress test could mean you qualify for a lower mortgage amount than you were expecting.
How to qualify for the lowest possible Ontario mortgage rate
The best way to qualify for low mortgage rates in Ontario is to be as financially healthy as you can be and choose the mortgage option that’s best suited to your needs. Here are some tips:
- Save a down payment of at least 20%.
- Work to strengthen your credit score before applying.
- Pay down debt to reduce your GDS and TDS ratios before applying.
- Choose a mortgage with a shorter term, such as 5 years, rather than a longer-term option.
- Shop around to compare mortgage interest rates and loan terms from different lenders.
Is the lowest Ontario mortgage rate the best rate?
Just because you’ve found a mortgage rate that’s lower than the rest, that doesn’t mean it’s the best mortgage for your needs. There are many other variables to consider when choosing a mortgage.
The best mortgage rate for you might not be the lowest, because you need to consider which mortgage will be most suitable for your situation, both when you apply for it and when you think ahead to future needs.
For example, if you prefer to have a consistent budget, you may want to go with a fixed-rate mortgage, which would keep your monthly payments stable over the course of the term. If you don’t want to worry about variable interest rates — and payment amounts — this peace of mind might be worth paying a slightly higher interest rate.
While considering the best mortgage rates in Ontario is important, it’s also a good idea to think about convenience. Some homebuyers prefer to get a mortgage with their day-to-day financial institution because they have an established relationship and are likely comfortable with the online payment tools. Others may prefer to go with a major bank or lender with brand recognition, even if the rate is slightly higher, as opposed to a lesser-known lender that offers lower rates.
Use current Ontario mortgage rates to estimate your monthly payment
If you plan on applying for a new mortgage or renewing your current one in the near future, it’s essential to check the current mortgage rates in Ontario so you can plan accordingly.
Even a 1% difference in mortgage rates could greatly affect your budget. For example, let’s say you need a mortgage for $500,000. You’re interested in a closed, 5-year term mortgage with a 25-year amortization schedule. One lender has an advertised rate of 4%, while another shows 5%.
If you chose the 4% interest rate, your monthly payment would be $2,630.10. But if you went with the 5% interest rate, it would be $2,908.02.
That’s a difference of nearly $300 a month — and $3,335 per year. If rates increased to 6%, your monthly payment would be $3,199.03.
Keep in mind that the type of mortgage, term, amortization, payment schedule, and down payment will also affect the overall cost of your mortgage. A handy way to accurately compare costs without doing a lot of math is by using an Ontario mortgage payment calculator.
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Frequently asked questions for mortgage rates in Ontario
Mortgage interest rates have a huge impact on the total cost of your loan.
Getting the lowest rate possible will save you money, while paying an unnecessarily high rate will cost you money. That being said, rates shouldn’t be the only determining factor when comparing lenders; penalty costs, portability and overall customer service are also key considerations.
NerdWallet makes it easy to browse some of the best mortgage rates in Ontario, 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.
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