Understanding Mortgages and Getting the Best Mortgage Rates

When it comes to buying a home or renewing your mortgage in Grande Prairie, one of the most important factors to consider is your mortgage rate. Why? Because it can be the difference between paying a lot more than you need to or keeping your monthly payments affordable. No one wants to feel financially overextended so finding the best mortgage rates is crucial to ensuring you don’t pay more than necessary. Whether you’re a first-time homebuyer or renewing your mortgage, being aware of current rates will help ensure a smooth, stress-free experience. Here’s a closer look at mortgage rates and why they matter.

What is a Mortgage Rate?

A mortgage rate is the interest rate you’ll pay on your mortgage loan. When you borrow money to buy a home, the lender charges you interest as part of the cost of borrowing that money. Each time you make a payment, a portion goes toward paying down the loan's principal (the amount you borrowed), and the other portion covers the interest cost. Simply put, the mortgage rate is the fee you pay for the privilege of borrowing money to buy your home.

There are two types of mortgage rates:

• Fixed-Rate Mortgage: With a fixed-rate mortgage, the interest rate remains the same for the entire term of the loan, meaning your monthly payments stay predictable and consistent.

• Adjustable-Rate/Variable rate Mortgage (ARM): With an adjustable-rate mortgage, the interest rate can change up to 10 times per year at scheduled Bank of Canada announcements. This means your payments may go up—or down—throughout the life of the loan.

The mortgage rate you get will have a direct impact on how much you pay over the life of your mortgage. A lower rate means you’ll pay less overall, while a higher rate can significantly increase your monthly payments.

Example of How Adjustable-Rate Mortgages Work

Let’s say Mr. and Mrs. Jones take out a $300,000 mortgage with a 5% adjustable interest rate and a 30-year amortization period. Their monthly mortgage payment would be $1,601.07. However, because it’s an adjustable-rate mortgage, the rate can change over time. If the rate increases to 6%, their monthly payment jumps to $1,784.47—a $183 increase. On the flip side, if the rate drops to 4%, their payment decreases to $1,426.56, saving them more than $174 each month.

Although it is unheard of for the Bank of Canada to adjust rates by 1% this example shows what a loan could do during a 5 year term.

How Are Mortgage Rates Set?

Mortgage rates are influenced by a number of factors, including the economy, market yields, and inflation. The Bank of Canada plays a major role in setting interest rates, with 10 scheduled announcements per year where they decide to increase, decrease, or leave the target rate unchanged. Another important factor is the residential bond market. When the yield on mortgage bonds is high, mortgage rates tend to be high as well. Conversely, when bond yields are low, mortgage rates tend to follow suit.

Why Choose Gert Martens Mortgage Team?

At Gert Martens Mortgage Team, we understand that finding the best mortgage rates in Alberta is key to securing affordable homeownership. Even small fluctuations in mortgage rates can have a significant impact on your monthly payments, so having an expert on your side to help you navigate your options is essential. We’re committed to finding you the best mortgage rate possible, whether you’re purchasing your first home, renewing your mortgage, or refinancing.

Ready to explore your mortgage options? Contact our Grande Prairie Mortgage Broker team to learn more and take the first step toward securing the best mortgage rate for you.