By: Henry Parker
Purchasing a home is a significant financial decision a person can make. Whether it’s your first house or an upgrade for growing needs, finding a favorable mortgage rate plays a critical role in your long-term financial well-being. Even small percentage differences in rates may lead to notable cost savings—or added expenses—over time. Seasoned Toronto-based mortgage broker Stacey Soans outlines practical steps to help increase your chances of securing competitive mortgage rates and maximize the value of your homebuying journey.
Understand How Mortgage Rates Work
Before shopping for mortgage rates, it’s important to understand the factors that influence them. Mortgage rates aren’t set arbitrarily. Instead, they’re impacted by a mix of economic elements, including the Federal Reserve’s interest rate policies, inflation trends, and broader market conditions. Lenders also assess the borrower’s credit history, employment consistency, income, and loan-to-value ratio when determining specific offers.
Rates can be fixed—remaining the same throughout the loan term—or adjustable, fluctuating over time based on market shifts. Familiarity with these fundamentals can help buyers feel more informed and better prepared when reviewing loan options.
Improve Your Credit Score
“A strong credit score is a straightforward way to potentially qualify for competitive rates,” says Stacey Soans. “Lenders use credit scores to estimate how likely you are to repay your loan on time. Generally, higher scores are associated with lower risk, which can open doors to more favorable offers.”
Paying down high-interest debt, maintaining credit utilization below 30 percent, and making timely payments can contribute to an improved score. Regularly reviewing your credit report can help uncover errors or discrepancies that could unfairly impact your rating. Addressing these issues in advance strengthens your application and improves eligibility for favorable terms.
Save for a Larger Down Payment
The size of your down payment influences both the loan amount and the interest rate offered. Conventional loans typically come with better rates for buyers who put down 20 percent or more of the home’s purchase price. While this isn’t a fixed rule, larger down payments typically reduce lender risk, which can lead to more attractive financing terms.
If reaching the 20 percent threshold is not feasible, aiming for 10 percent or higher can still improve outcomes. A larger deposit may also help avoid private mortgage insurance (PMI), which is commonly required for loans with lower down payments.
Shop Around and Compare Lenders
When it comes to securing a mortgage, not all lenders offer the same terms. Even with identical financial credentials, buyers may receive varying offers depending on the lender’s policies and criteria. This is where a mortgage broker can be a valuable ally.
Notes Soans, “Instead of navigating the mortgage landscape alone, a broker does the heavy lifting—exploring multiple options, comparing rates, and negotiating on your behalf to help you find some competitive terms available.”
An experienced mortgage broker has access to a broad network of banks, credit unions, and digital lenders—including some that may not work directly with consumers. This extended reach can increase your exposure to a wider range of solutions tailored to your financial goals. Brokers also break down the full cost of each loan, helping you consider not just interest rates, but also closing costs, discount points, and other fees that affect your total repayment.
By calculating and comparing the annual percentage rate (APR), a broker offers a more complete picture—empowering buyers to make informed, side-by-side comparisons that support long-term savings.
Consider Locking in Your Rate
Interest rates can shift quickly in response to economic and market changes. Locking in a rate during the application process can provide some peace of mind and protect borrowers from short-term volatility. Rate locks typically last 30 to 90 days, offering buyers a window to complete their loan process with more predictability.
While some lenders offer complimentary rate locks, others may charge a fee. It’s important to review the terms closely. In cases where market rates drop after locking in, certain lenders might offer a renegotiation opportunity—though policies vary. Discuss your options with your lender to understand what flexibility may exist.
Choose the Right Mortgage Type
The type of mortgage you choose plays a role in the rate you’ll be offered. Fixed-rate and adjustable-rate mortgages (ARMs) each come with distinct benefits, depending on your financial situation and future plans. Fixed-rate loans offer consistent payments, which can be advantageous for long-term homeowners. ARMs often start with relatively lower rates and may appeal to buyers planning to move or refinance in the short term.
Evaluating the pros and cons of both types will help you align your choice with your financial goals. While lenders can provide recommendations, running your own calculations under various scenarios adds an extra layer of confidence.
Strengthen Your Financial Profile
In addition to credit scores, lenders assess several other indicators when evaluating mortgage applications. A history of stable employment and reliable income suggests financial consistency, which may help improve your standing.
Reducing your debt-to-income ratio (DTI) can also boost your eligibility. Lenders typically prefer borrowers whose total monthly debt—including the projected mortgage payment—remains below 43 percent of gross income. Paying down existing obligations or increasing your earnings can help achieve a lower DTI and increase your chances of qualifying for better terms.
Time Moves in the Market Wisely
While market conditions can impact mortgage rates, they are difficult to forecast with certainty. Economic slowdowns, for instance, are often accompanied by reduced interest rates as part of broader stimulus strategies. Monitoring updates from financial institutions and economic analysts may provide helpful context on market movements.
“It’s crucial not to let timing paralyze your decision. Waiting too long for the ‘perfect’ rate may mean missing out on good opportunities altogether. Buyers are often better served by balancing personal readiness with broader market trends,” advises Soans.
Avoid Common Pitfalls
Some buyers unintentionally make choices that complicate the loan process. Opening new lines of credit or making large purchases during mortgage approval can impact your eligibility and possibly affect the rate you’re offered. Avoiding additional debt before closing on your home can help preserve your financial standing.
Also, be cautious with no-cost loans. These may seem appealing due to reduced upfront fees but often carry higher interest rates that increase overall borrowing costs. Evaluating the trade-offs carefully helps ensure you’re not sacrificing long-term savings for short-term convenience.
Securing a competitive mortgage rate involves thoughtful planning, informed comparisons, and a clear understanding of your financial profile. Buyers can improve outcomes by strengthening credit, increasing savings, comparing lender options, and choosing a loan structure that fits their goals. While market trends influence rates, proactive steps can often make a significant difference. Since homeownership represents a major investment, the mortgage you choose lays the groundwork for future equity and financial security. Partnering with trusted experts like a mortgage broker may reduce stress and help guide buyers with greater clarity and confidence.
Disclaimer: The information provided in this article is intended for general guidance and educational purposes only. It is not financial, investment, or mortgage advice. Homebuyers should consult with a licensed mortgage broker, financial advisor, or other qualified professionals to assess their specific financial situation and receive personalized recommendations. Rates, terms, and policies may vary based on individual circumstances and market conditions.
Published by Jeremy S.
