Tangerine Bank, a subsidiary of Scotiabank, is a popular online-only bank in Canada known for its competitive rates and straightforward banking products. When it comes to mortgages, understanding the current rates offered by Tangerine is crucial for potential homebuyers and those looking to refinance their existing mortgages. In this comprehensive guide, we’ll explore Tangerine’s mortgage rates, products, and how they compare to other lenders in the market.
Tangerine Prime Rate
The Tangerine Prime Rate is a key factor in determining the interest rates for variable-rate mortgages and Home Equity Lines of Credit (HELOCs). As of February 06, 2024, the Tangerine Prime Rate stands at 7.20%. This rate is influenced by the Bank of Canada’s overnight lending rate and can fluctuate based on economic conditions. When the prime rate changes, it directly impacts the interest rates of variable-rate mortgage products.
Understanding the Prime Rate
The prime rate is the interest rate that banks use as a benchmark for various lending products, including mortgages, lines of credit, and loans. It’s typically based on the overnight lending rate set by the Bank of Canada, which is the interest rate at which major financial institutions borrow and lend funds among themselves for one business day.
When the Bank of Canada raises or lowers its overnight lending rate, banks adjust their prime rates accordingly. This change in the prime rate then affects the interest rates charged on variable-rate mortgages and other lending products tied to the prime rate.
It’s important to note that while the prime rate serves as a reference point, lenders may offer different rates to their customers based on various factors, such as credit score, down payment amount, and overall risk assessment.
Tangerine Mortgage Products
Tangerine offers a range of mortgage products to suit different homebuyer needs and preferences. Let’s take a closer look at their fixed-rate mortgages, variable-rate mortgages, and HELOCs.
Fixed-Rate Mortgages
Fixed-rate mortgages offer stability and predictability, as the interest rate remains constant throughout the mortgage term. Tangerine provides fixed-rate mortgages with terms ranging from 1 to 10 years. Here’s a table showcasing Tangerine’s current fixed mortgage rates:
| Term | Rate |
|---|---|
| 1-year (closed) | 7.29% |
| 2-year (closed) | 6.39% |
| 3-year (closed) | 5.49% |
| 4-year (closed) | 5.49% |
| 5-year (closed) | 5.44% |
| 7-year (closed) | 6.00% |
| 10-year (closed) | 6.40% |
The main advantage of a fixed-rate mortgage is that your interest rate and monthly payments remain the same for the duration of the term, providing peace of mind and easier budgeting. This can be particularly beneficial during periods of economic uncertainty or rising interest rates, as your mortgage payments won’t be affected.
However, it’s important to note that fixed-rate mortgages typically come with stricter prepayment penalties and may not allow you to take advantage of potential decreases in interest rates during your term.
Closed vs. Open Mortgages
Tangerine’s fixed-rate mortgages are all closed mortgages, which means there are limits on your ability to make prepayments or pay off the mortgage before the end of the term. Closed mortgages generally have lower interest rates than open mortgages, but they come with prepayment penalties if you decide to break the mortgage before the end of the term.
Open mortgages, on the other hand, allow you to make additional payments or pay off the mortgage in full without penalties. However, they typically come with higher interest rates to compensate for the added flexibility.
Variable-Rate Mortgages
Tangerine offers a 5-year variable-rate mortgage, which is currently set at 6.80%. With a variable-rate mortgage, your interest rate can fluctuate based on changes in the Tangerine Prime Rate. If the prime rate increases, your mortgage rate and payments will also increase, and vice versa.
The advantage of a variable-rate mortgage is that you may benefit from lower interest rates if the prime rate decreases. This can result in significant savings over the life of your mortgage, especially during periods of low or declining interest rates.
However, the risk is that your payments can increase if the prime rate rises, which can strain your budget and make it more difficult to manage your mortgage payments.
Triggers and Stress Tests
When applying for a variable-rate mortgage, lenders will typically use a higher “trigger rate” to qualify you for the mortgage. This trigger rate is designed to ensure that you can still afford your mortgage payments if interest rates rise significantly during your term.
Additionally, as part of the mortgage stress test introduced in 2018, borrowers must qualify at a rate that is either the contracted rate plus 2% or the Bank of Canada’s benchmark qualifying rate, whichever is higher. This stress test helps ensure that borrowers can handle potential interest rate increases and avoid overextending themselves financially.
Home Equity Line of Credit (HELOC)
A HELOC allows you to borrow against the equity in your home. Tangerine’s current HELOC rate is 7.7%, which is 0.5% above their prime rate. With a HELOC, you can access funds as needed up to your approved credit limit, making it a flexible borrowing option for home renovations, debt consolidation, or other expenses.
HELOCs are typically set up as revolving lines of credit, which means you can borrow, repay, and re-borrow funds as needed, similar to a credit card. However, it’s important to note that your home serves as collateral for the HELOC, so failing to make payments could put your home at risk.
Combining a HELOC with a Mortgage
Many homeowners choose to combine a HELOC with their mortgage, a strategy known as a “readvanceable mortgage.” This allows you to access your home equity as you pay down your mortgage principal, providing additional funds for home improvements, investments, or other expenses.
However, it’s important to carefully consider the risks and potential consequences of using a HELOC, as it can increase your overall debt load and potentially put your home at risk if you’re unable to make payments.
Comparing Tangerine Mortgage Rates with Other Lenders
When shopping for a mortgage, it’s essential to compare rates from multiple lenders to ensure you’re getting the best deal. Some of the other major lenders to consider include:
- BMO
- Scotiabank
- CIBC
- TD
- National Bank
- First National
- RBC
- True North
Working with a mortgage broker can be beneficial, as they have access to rates from various lenders and can help you find the most competitive offer based on your specific situation. Mortgage brokers can also provide valuable guidance and advice throughout the mortgage process, helping you navigate the complexities of different mortgage products and lender requirements.
Mortgage Rate Comparison Tools
To make the comparison process easier, there are several online mortgage rate comparison tools available. These tools allow you to input your desired mortgage details, such as the loan amount, amortization period, and property location, and then provide you with a list of current rates from various lenders.
Some popular mortgage rate comparison tools in Canada include:
- RateSpy
- RateHub
- LowestRates.ca
- Ratehub.ca
These tools can be a great starting point for your mortgage rate research, but it’s important to remember that the rates displayed may not reflect the final rate you’ll be offered, as lenders will consider your individual financial situation and credit profile.
Factors Affecting Mortgage Rates at Tangerine
Several factors can influence the mortgage rate you qualify for at Tangerine:
- Credit Score: A higher credit score generally translates to a lower mortgage rate, as it demonstrates your creditworthiness and ability to manage debt responsibly. Lenders view borrowers with higher credit scores as lower risk, and therefore offer them more favorable rates.
- Down Payment Size: Making a larger down payment can help you secure a lower mortgage rate, as it reduces the lender’s risk. If your down payment is 20% or more of the home’s purchase price, you can also avoid paying for mortgage default insurance, which can save you thousands of dollars over the life of your mortgage.
- Debt Service Ratios: Lenders use debt service ratios to assess your ability to manage mortgage payments alongside your other debts. These ratios compare your monthly income to your monthly debt obligations, including the proposed mortgage payment. A lower debt-to-income ratio can help you qualify for a better mortgage rate.
- Employment and Income Stability: Lenders prefer borrowers with stable and consistent employment and income. If you have a history of frequent job changes or fluctuating income, you may be viewed as a higher risk and offered a higher mortgage rate.
- Property Type: The type of property you’re purchasing can also impact your mortgage rate. For example, lenders may offer slightly higher rates for non-owner-occupied properties, such as investment properties or vacation homes, as they are considered riskier investments.
- Mortgage Term: Generally, shorter mortgage terms (such as 1-year or 2-year terms) tend to have higher interest rates compared to longer terms (like 5-year or 10-year terms). This is because lenders take on more risk with shorter terms, as they need to re-qualify and re-price the mortgage more frequently.
Other factors that can impact your mortgage rate include the overall economic climate, the lender’s risk appetite, and any special promotions or discounts being offered.
How to Get the Best Mortgage Rate at Tangerine
To increase your chances of securing the best mortgage rate at Tangerine, consider the following tips:
- Improve Your Credit Score: Pay your bills on time, keep your credit utilization low, and avoid applying for new credit in the months leading up to your mortgage application. A higher credit score can help you qualify for lower interest rates.
- Make a Larger Down Payment: Save up for a larger down payment to reduce your mortgage amount and potentially qualify for a lower interest rate. Aim for at least 20% to avoid paying for mortgage default insurance.
- Lower Your Debt Service Ratios: Pay down existing debts and avoid taking on new debt to improve your debt service ratios and demonstrate your ability to manage mortgage payments.
- Maintain Stable Employment and Income: Lenders prefer borrowers with a consistent employment history and stable income. If you’ve recently changed jobs or experienced income fluctuations, be prepared to provide additional documentation and explanations.
- Shop Around and Negotiate: Compare mortgage rates from Tangerine and other lenders, and don’t hesitate to negotiate with your chosen lender to see if they can offer you a better rate. Lenders may be willing to match or beat competitor rates for qualified borrowers.
- Consider a Mortgage Broker: Working with a mortgage broker can give you access to a wider range of lenders and mortgage products, increasing your chances of finding the best rate for your situation.
- Time Your Application: If you’re applying for a variable-rate mortgage, consider timing your application when interest rates are low or expected to decrease in the near future.
- Explore Promotions and Discounts: Keep an eye out for any special promotions or discounts offered by Tangerine or other lenders, such as cash-back incentives or rate discounts for bundling products or services.
Tangerine Mortgage Pre-Approval Process
Getting pre-approved for a mortgage is an important step in the homebuying process. A pre-approval gives you a clear idea of how much you can afford to borrow and shows sellers that you’re a serious buyer.
To get pre-approved for a Tangerine mortgage, you’ll need to provide documentation such as:
- Proof of income (pay stubs, T4 slips, or tax returns)
- Proof of assets and down payment (bank statements)
- Identification (driver’s license, passport)
- Details of your existing debts and financial obligations
During the pre-approval process, Tangerine will review your credit report and assess your financial situation. They’ll also outline the fees, terms, and conditions associated with your mortgage, including prepayment privileges and penalties.
It’s important to note that a pre-approval is not a guarantee of final mortgage approval, as your financial situation may change or the property you choose may not meet the lender’s criteria.
Benefits of Getting Pre-Approved
Getting pre-approved for a mortgage offers several benefits:
- Establishes Your Budget: A pre-approval gives you a clear understanding of how much you can realistically afford to spend on a home, helping you focus your search and avoid disappointment.
- Shows Sellers You’re Serious: When making an offer on a home, a pre-approval letter demonstrates to sellers that you’re a qualified buyer with the financial means to complete the purchase.
- Speeds Up the Approval Process: Having a pre-approval in place can help streamline the final mortgage approval process, as much of the documentation and verification has already been completed.
- Locks in Your Interest Rate: Some lenders may allow you to lock in your pre-approved interest rate for a specific period, protecting you from potential rate increases while you search for a home.
Pre-Approval vs. Pre-Qualification
It’s important to understand the difference between a mortgage pre-approval and a pre-qualification:
- Pre-Qualification: A pre-qualification is a more informal process where a lender provides a rough estimate of how much you may be able to borrow based on basic information about your income, assets, and debts. It does not involve a credit check or in-depth verification of your financial information.
- Pre-Approval: A pre-approval is a more thorough process that involves a detailed review of your credit report, employment history, and financial documentation. It provides a more accurate estimate of your maximum mortgage amount and the interest rate you may qualify for.
While a pre-qualification can be a useful starting point, a pre-approval carries more weight with sellers and is generally required before making an offer on a home.
Frequently Asked Questions
- What is Tangerine’s current mortgage rate? Tangerine’s mortgage rates vary depending on the type of mortgage and term you choose. As of February 06, 2024, their lowest rate is 5.44% for a 5-year fixed-rate mortgage.
- Can you negotiate mortgage rates at Tangerine? While Tangerine’s rates are generally competitive, it never hurts to negotiate. If you have a strong credit profile and a significant down payment, you may be able to secure a lower rate.
- How long does a mortgage pre-approval from Tangerine last? A mortgage pre-approval from Tangerine is typically valid for 90 to 120 days. If you don’t find a home within that time frame, you may need to reapply for a pre-approval.
- Does Tangerine offer mortgage default insurance? Yes, Tangerine offers mortgage default insurance (also known as CMHC insurance) for borrowers with down payments of less than 20% of the home’s purchase price. This insurance protects the lender in case the borrower defaults on the mortgage.
- Can I port my Tangerine mortgage to another lender? Tangerine mortgages are portable, which means you can transfer your existing mortgage to a new property if you decide to move before the end of your term. However, there may be fees and restrictions involved in the porting process.
- Does Tangerine offer mortgage payment relief options? In times of financial hardship, Tangerine may offer mortgage payment relief options, such as deferring payments or extending the amortization period. These options are evaluated on a case-by-case basis and may be subject to certain eligibility criteria.
Conclusion
Tangerine offers a range of competitive mortgage products, with rates that are often in line with or better than those offered by the big banks. By understanding the factors that influence mortgage rates and taking steps to improve your financial profile, you can increase your chances of securing the best possible rate.
When shopping for a mortgage, be sure to compare rates from multiple lenders and consider working with a mortgage broker to access a wider range of options. With careful planning and research, you can find the right mortgage solution to help you achieve your homeownership goals.
Remember, securing the best mortgage rate is just one aspect of the homebuying process. It’s also important to consider factors such as prepayment privileges, portability, and the overall customer service and reputation of the lender you choose to work with.
By taking the time to educate yourself on Tangerine’s mortgage offerings and the mortgage market as a whole, you’ll be better equipped to make an informed decision that aligns with your financial goals and long-term plans.
