Should I Get a Mortgage with BMO Bank of Montreal?

Jordann Brown
by Jordann Brown June 26, 2017 / No Comments

BMO Bank of Montreal has long been considered one of the top banks in Canada and is often one of the first choices for homebuyers looking to secure a mortgage. But what’s it like actually obtaining a mortgage through this lender? What are the unique characteristics of a BMO Bank of Montreal mortgage and is it the right choice for you?

Let’s look into the specifics of getting a BMO Bank of Montreal mortgage.

The down payment

When you purchase a home, you need to make a down payment and obtain a mortgage for the remaining amount. With BMO Bank of Montreal, as with all lenders, the minimum down payment allowed by law is 5%, but that number changes depending on the purchase price of your home.

These rules are set out by the federal government and go like this: If your home’s purchase price is less than $500,000, the minimum down payment is 5%. If your home’s purchase price is between $500,000 and $999,999.99, your minimum down payment is 5% on the first $500,000 and 10% on the remaining amount. And if your home’s purchase price is $1 million or more, you must put down at least 20% of the purchase price.

These rules are the same no matter which lender you choose, and are put in place to ensure you don’t buy more house than you can afford. If you need help figuring out exactly how large your down payment needs to be, you can use RateHub.ca’s mortgage affordability calculator.

Mortgage default insurance

Sometimes also referred to as CMHC insurance, mortgage default insurance is required by law to protect the lender in the event you default on your mortgage.

The cost of the insurance is calculated as a percentage of your home’s purchase price. The bigger the down payment, the smaller the percentage and the less you’ll pay in premiums. Here are the exact percentages you’ll pay depending on the size of your home’s down payment:

  • If your down payment is between 5% and 9.99%, your premium is 4% of the purchase price.
  • If your down payment is between 10% and 14.99%, your premium is 3.1% of the purchase price.
  • If your down payment is between 15% and 19.99%, your premium is 2.8% of the purchase price.
  • If your down payment is 20% or more, you don’t pay a premium.

As you can see, the larger your down payment, the less you’ll pay for mortgage default insurance. These premiums are the same no matter which bank you choose.

Your mortgage default insurance is added onto your mortgage and you’ll pay it off over the life of the loan. If you’re considering putting down a larger down payment to reduce your premium rates (and therefore your monthly mortgage payment), you can use RateHub.ca’s mortgage payment calculator to see exactly how the different premiums and down payments will affect your regular mortgage payment.

Read: The Differences Between Mortgage Default Insurance and Mortgage Life Insurance

Amortization period

Your mortgage’s amortization period is how long you will have the mortgage overall. If your down payment is less than 20% of the home’s purchase price, the maximum amortization is 25 years.

Mortgage term

Your mortgage’s term is the length of time you agree to pay a specific mortgage interest rate to BMO Bank of Montreal. If you’re confident about your financial situation and you think mortgage interest rates are likely to rise in the future, a longer mortgage term might be right for you. On the other hand, if you need more flexibility in your mortgage term (breaking your term can result in penalties) because you may move for work or any other reason, a shorter mortgage term is a good option for you.

Payment frequency

When you apply for a mortgage with BMO Bank of Montreal, there will be many decisions to make. You’ll need to choose the amortization period, how long you’d like your mortgage term to be, and whether you want a fixed or variable interest rate. Another choice you’ll need to make is what payment frequency works for you. Your mortgage’s payment frequency is how often you pay your mortgage. You can choose from monthly, semi-monthly, biweekly, weekly, accelerated biweekly, or accelerated weekly. An accelerated payment schedule allows you to pay off your mortgage sooner but also results in higher payments.

Prepayment privileges

As a mortgage holder with BMO Bank of Montreal, you’ll have two options if you want to pay down your mortgage ahead of schedule. The first option will be to add up to 10% of the current mortgage payment amount for a BMO Smart Fixed Mortgage or up to 20% of your mortgage payment for any other kind of closed mortgage. Increasing your monthly payment can be a good option if you received a raise at work and have some extra room in your budget.

The second option is to make an annual lump-sum payment (minimum $100). If you have a BMO Smart Fixed Mortgage, you can make a maximum of 10% of the original mortgage amount. For any other kind of closed mortgage, you can make a payment of up to 20% of the original mortgage amount. This type of prepayment is a good option if you receive an inheritance or another windfall.

Read: 5 Ways to Pay Down Your Mortgage Early

Mortgage rates

Your mortgage rate is the interest rate you’ll pay on your mortgage. Fixed-rate mortgages don’t change for the entire mortgage term. But variable-rate mortgages are pegged to the bank’s prime rate and can fluctuate throughout the term.

BMO Bank of Montreal offers mortgage interest rates that are competitive with the broader market. As of June 20, the rate on the five-year BMO Smart Fixed mortgage is 2.59%. On RateHub.ca, the best mortgage rate for a five-year fixed-rate mortgage is 2.24%. If you’re certain you want to obtain a mortgage from BMO Bank of Montreal and you want the lowest possible mortgage interest rate, you should try negotiating (either on your own or through a mortgage broker) to obtain a better interest rate than the posted rate. Negotiating is common practice and is a great way to save yourself thousands of dollars in mortgage interest.

Compare today's top mortgage rates

Looking for a great mortgage rate? Check out the lowest mortgage rates available

Also read: