Low mortgage rates can offset high prices

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While rising home prices are good news for sellers and buyers seeking a sound investment, they can also make it that much harder for some Canadians to enter into homeownership.

As a recent article from The Globe and Mail points out, even with mortgage tightening and a dip in sales, home prices continue to remain high throughout the country. As home sales decreased, so did the number of homeowners putting their properties up for sale, keeping the inventory of available properties fairly low, and, by extension, prices high.

"The latest data suggest that the softening in prices is likely to be milder than expected," the article stated. "In Vancouver, the city that was the frothiest in 2011 and the hardest hit by last year's correction, prices did decline. But they're already on the mend."

Saving money on mortgage rates
One way for buyers to make homeownership more affordable is by focusing on obtaining the best mortgage rates. A low mortgage rate will result in less interest building up over the lifespan of a loan, meaning less money spent overall. It will also make keeping up with monthly payments easier, allowing homeowners to focus on paying off their mortgage balance and building up equity in their properties at a faster rate.

Shop around
As with any major purchase, it's a good idea for buyers to shop around. Individuals who do the proper research and take their time will have a much better chance of scoring a low mortgage rate. There is no shortage of mortgage lenders on the market, and the competitiveness of the business means savvy borrowers have plenty of opportunities to lower their rates.

Investing in a mortgage broker is also a good way to find low mortgage rates. Mortgage brokers often have access to lenders that borrowers may not be able to do business with on their own, opening the door to even more options when it comes to interest rates.

Boost credit
It will be much easier to obtain a low mortgage rate if a borrower makes themselves attractive to lenders. The best way to do this is by improving their credit score. A borrower's credit can often be one of the most essential factors when it comes to mortgage rates. It acts as a calling card with lenders, letting them know whether a borrower is responsible and able to handle financial obligations. The higher a score, the better. However, individuals with lower credit scores shouldn't give up all hope. There are plenty of strategies they can use to improve their scores, including paying bills on time, diversifying the type of credit they use and taking care of any outstanding debts.

Pay more
Paying more upfront may seem counterintuitive to saving on a home loan, but a bigger down payment can mean lower mortgage rates, which will offer greater savings down the road. More money put down up front means less risks for lenders, allowing them to offer lower rates. A minimum down payment of 20 percent will also make it easier for homebuyers to find a loan in the first place, as lower down payments lead to less options.

Of course, a low mortgage rate alone doesn't mean that a home loan is affordable, but it can make a big difference in how long and how much it takes for a homeowner to repay their mortgage. Buyers should do what they can to make paying off their mortgage an easier process.

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