Joseph Grinkorn – Factors that Influence Mortgage Interest Rate

Buying a home is arguably the most important investment of your life as Joseph Grinkon explained. Unless you’re in the minority and can afford to pay cash for your property, you’ll likely need to apply for a mortgage to cover the majority of the purchase cost.

Regardless of the type of mortgage you choose, you will necessarily have to adhere to a mortgage rate. This one, established by the financial institution with which you will do business, can be fixed or variable.

In any case, as per Joseph Grinkorn, it greatly influences the interest you will have to repay and the total amount you will have to pay for your home. It is therefore essential to understand what determines it and what can cause it to vary.

What elements can have an impact on the rate of your mortgage loan?

First of all, you should know that any business, including your financial institution, seeks above all to make a profit. The price it asks you to pay must be higher than the price it must itself pay in order to gain from the transaction. To make this profit, your lender charges you interest on your loan amount. The final price you will pay will therefore be higher than your creditor’s financing cost.

The cost of financing is also one of the factors that most influence your mortgage rate, but it is far from the only one. This includes taking into account the operating costs of the lender, the amount it needs to cover the risk of non-repayment, the national economic situation, etc.

Here are some of the factors that can impact your mortgage rate.

Your credit history

Your credit history and payment history can greatly affect the rate at which you borrow. It is also not without reason that banks refuse to grant a mortgage to individuals with a bad credit record.

The biggest risk your creditor takes in granting you a loan is that you do not repay the amount borrowed. To determine this risk of non-repayment (or credit risk), financial institutions will assess your background. They’ll want to know your credit score, how you manage your loans and repayments, and whether you’ve always made your payments on time.

Your credit report indicates the level of risk you represent. A good credit report can therefore reduce the lender’s concern about this risk of non-repayment since he will see that you are used to paying your debts. A good payment history usually results in a better interest rate. Conversely, the greater the risk you represent, the higher the mortgage rate you will be granted.

The characteristics of your mortgage loan

Certain characteristics of your mortgage loan can also influence the level of risk taken by the financial institution and therefore increase or decrease your interest rate.

Mortgage loan insurance

According to Joseph, if you are borrowing more than 80% of the value of the property you want to buy, you will necessarily need to take out mortgage loan insurance. This serves to protect the lender in the event of default on your part. Thanks to this additional protection, your financial institution can grant you a loan at a lower rate than it would without insurance.

The term mortgage

At the end of your term, you will need to apply for a mortgage renewal with your lender or another financial institution as Joseph Grinkon suggested. In Quebec, most mortgage contracts have a term of five years, but the term can vary between six months and ten years.

Since mortgage rates are always subject to change, the more often you renew your mortgage, the more you risk contracting a different rate from the previous one, higher or lower depending on the case. If you want to be sure to pay the same rate for a longer term, you will need to opt for a longer mortgage term.

Be aware, however, that short-term contracts will usually have a lower interest rate than long-term contracts because it is easier for the lender to predict market conditions, such as inflation and economic growth.