How to Compare Mortgage Rates
APR, terms, prepayment options and the fine print.
The headline rate isn't the whole story. APR, prepayment terms, and penalty formulas matter just as much.
Rate vs APR
The rate is the interest charged on the principal. APR includes some fees and gives a truer cost. In Canada, APR includes most lender fees but not legal, appraisal, or title insurance.
Insured vs uninsured pricing
Insured rates (under 20% down) are often 0.10–0.30% lower because the lender takes less risk. Uninsured rates are higher; insurable (20%+ down with insurable property) sit in between.
Prepayment privileges
- Annual lump-sum: typically 15–20% of original balance
- Payment increase: typically 15–100% of regular payment
- Double-up payments on some lenders
- Skip-a-payment features (rare)
Penalty formulas
For fixed mortgages, big banks often use posted-rate IRD which inflates penalties. Mono-line lenders use discounted-rate IRD which is usually much smaller.
Other fine print
- Portable: can you move the mortgage to a new home?
- Assumable: can a buyer take it over?
- Collateral charge vs standard charge
- Renewal terms — auto-renewal at posted rate can be expensive
Key takeaways
- Lowest rate ≠ best mortgage
- Check the penalty formula on fixed rates
- Confirm prepayment limits in writing
- Mono-line and credit-union options often beat the big banks
Sources used
Disclaimer: This guide is for educational purposes only and does not constitute financial, mortgage, legal, or tax advice. Always verify details with qualified professionals and financial institutions.