How much can you save by shopping around for a mortgage?
How much research do you do before buying a new phone, a new TV, or a new car? Meticulously comparing every make and model in the market to make sure you purchase the best available for the best price. And it makes sense: This research can save you tens, if not hundreds of dollars. But what about when you’re choosing your financial products, particularly your mortgage? After all, your home might be the most expensive thing you ever purchase. Don’t you want to make sure you’re getting the best possible deal and saving the most amount of money possible?
Here’s how much you can save by shopping around for a mortgage.
First, though, we have to make some assumptions. Let’s say you’re a first time home buyer in BC. We’ll also assume you’re buying the average priced home in Vancouver which, in August 2019, cost $983,100 according to the Canadian Real Estate Board. Finally, we’ll assume you amortize your mortgage over 25 years, put 20% down, and choose a five-year fixed rate mortgage.
With that out of the way, let’s crunch some numbers using a mortgage payment calculator.
For a home priced $983,100, 20% down would be $196,620. The total mortgage required would be $786,480.
Assuming you choose a five-year fixed rate mortgage at the current posted rate of 5.34%, your total mortgage cost for the five-year term would be $4,728 per month. That’s a total of $56,736 per year and $283,680 over the course of the mortgage term.
However, we know that isn’t the best rate available.
Compare today's top mortgage rates
Looking for a great mortgage rate? Check out the lowest mortgage rates available
The same bank that currently offers a posted rate of 5.34% also offers a discounted rate of 2.97%. Let’s see how much a buyer would save if they shopped around for this rate instead of settling for the posted rate.
The mortgage would cost $3,638 per month. That would total $43,656 per year and $218,280 over the course of the mortgage term.
All told, that’s good for a savings of $1,090 per month, $13,080 per year, and $156,960 over the course of the mortgage term.
Of course, if you were to do a little Googling, you’d discover that 2.97% isn’t the best mortgage rate in Canada.
The best rate currently available is actually 2.39%.
If you were to shop around and qualify for that rate, your mortgage would cost $3,480 per month. That would total $41,760 per year and $208,800 over the course of the mortgage term.
So, shopping for the best mortgage rate would save you an additional $158 per month over the discounted bank rate. That’s good for a savings of $1,896 per year and $9,480 over the course of the mortgage term.
The bottom line
You work hard for your money. You likely make sure you get the best possible deal whenever you make a financial decision. But, have you thought of doing that when shopping for a mortgage? If not, hopefully our short little math lesson will convince you that a few minutes of your time will be more than worth it.
ALSO READ