Royal Bank of Canada (RBC) is the largest bank in the country by revenue, and one of the top 10 largest banks in the world. Serving Canadians since 1864, what started as a private financial institution founded by a small group of maritime business owners, has grown into Canada’s largest chartered bank. Today, RBC boasts more than 1,300 branches from coast to coast, with over 86,000 employees, and more than 17 million customers around the world. Unsurprisingly, about 1 in 3 mortgages in Canada are financed through RBC, making them the largest mortgage lender by market share. While RBC might be one of the most popular mortgage lenders, let’s take a look at what an RBC mortgage has to offer.
RBC mortgage eligibility requirements
RBC obtains borrower credit reports through TransUnion. In some cases, that could be good news for those with lower credit scores through Equifax. It is not uncommon for TransUnion credit scores to be higher than Equifax credit scores; with some people reporting a 100 point difference in their score between the two credit bureaus. TransUnion uses a slightly different scoring model that factors your employment history into your credit score, which accounts for the higher score for some individuals.
Having said that, the minimum credit score to qualify for an uninsured, conventional mortgage in Canada is consistent across all 6 big chartered banks. That means in order to qualify for an RBC mortgage you’ll need a credit score no less than 600. Keep in mind that mortgage eligibility also takes your income and down payment into account as well.
Most lenders, including RBC, will lend to post-bankrupts who have reestablished their credit history. Generally, you will need to have been discharged from your bankruptcy for at least 2 years and increased your credit score to the minimum qualifying level of at least 600. Your credit report should show at least 2 credit accounts that have been open for at least 2 years and have been paid as agreed. In order to demonstrate that you have rehabilitated your credit, you should not have any missed payments reported or carry balances more than 30% of your credit limit on things like credit cards and lines of credit.
In Canada, the minimum down payment for a house less than $500,000 is 5%. However, borrowers that provide less than 20% down are required to purchase mortgage default insurance through a provider like the Canadian Mortgage and Housing Corporation (CMHC), these are commonly referred to as insured mortgages. To qualify for a CMHC insured mortgage, borrowers must have a minimum credit score of 680.
RBC is legally obligated to prove their mortgage borrowers can pass the mortgage stress test. This test is mandatory irrespective of your credit score and the size of your down payment. The stress test is a mortgage calculation that weighs the monthly cost of homeownership and all your outstanding debt obligations against your monthly household income. In order to pass the mortgage stress test, no more than 39% of your monthly household income should be spent on things like your mortgage payment, property taxes, and utilities. And no more than 44% of your monthly household income should be spent on your monthly debt repayment obligations and housing costs combined.
Applying for a mortgage with RBC
RBC does not provide their mortgage products through brokers. You’ll need to apply through an in-house RBC mortgage specialist. The easiest way to apply for an RBC mortgage is to start with their online True House Affordability Tool. This is only a pre-qualification tool that estimates how much of a mortgage you could potentially qualify for. However, it’s a quick and easy access point to a mortgage pre-approval and full mortgage application.
In about a minute or less, the RBC True House Affordability tool will generate a pre-qualification estimate based on your credit rating, income, and the amount of your down payment without affecting your credit score. From there, the tool will connect you with an RBC mortgage specialist dedicated to your file. If you pre-qualify and choose to move forward with a mortgage pre-approval, your mortgage specialist will guide you through the entire process.
Alternatively, you can skip this tool and apply for a mortgage or mortgage pre-approval directly through:
- Your local branch
- By telephone: 1-800-769-2511
If you apply online, you can connect directly with a mortgage specialist in your area or you can search for a specific mortgage specialist by name. Before you begin your mortgage application, make sure you have the following documents on hand, such as:
- Photo identification such as a driver’s license or passport
- Proof of employment such as recent pay stubs, a letter from your employer confirming your position and length of employment, T4 slips, Notice of Assessment (NOA), etc.
- If you are self-employed you may need to provide NOA’s for the last 3 years, business registration or articles of incorporation if applicable, business credit report, etc.
- Financial statements confirming your assets
- Financial statements confirming your outstanding debts and other payment obligations such as child support, spousal support, unpaid taxes, etc.
- Proof of down payment and source of funds
- Proof you can pay for the closing costs
The entire process can range anywhere from a week to a month, or longer depending on the complexity of your situation, how quickly you can produce the necessary documents and the availability of your mortgage specialist. Generally, there are exceedingly few complaints about the amount of time it takes RBC to approve a mortgage and close the deal.
RBC mortgage interest rates
RBC mortgage interest rates are available on their website and are also disclosed during the mortgage application process. Special offer rates are marketed as a limited-time offer, but are not always the most competitive rates; they are often similar to the regular posted rates of their competitors. Special offers typically come with less flexible terms, and certain conditions like a qualifying credit score.
RBC mortgage rates are negotiable and they will sometimes match a lower rate from a competitor for the same mortgage product with similar terms. Discretionary rates are exceptionally low mortgage rates available for well-qualified borrowers. These rates are not advertised, and you will likely need to ask about them. If you have a high credit score and strong financial profile, ask your RBC mortgage specialist about the discretionary rates they offer and be prepared to negotiate. Sometimes RBC will negotiate a special rate for long time or high-net-worth customers as well.
RBC mortgage specialists are commissioned employees highly motivated to win your business. They have the option to forgo some of their commission payouts in order to offer you a lower mortgage interest rate. During the negotiating process, ask your mortgage specialist if they are willing to do this for you. You will need to drive a hard bargain, though. So make sure you have a credit score, financial profile, and mortgage amount worth their while.
Once you and the mortgage specialist have agreed on a mortgage interest rate, it’s guaranteed for 120 days.
Mortgage fees RBC might charge
When it comes to mortgage application fees, RBC does not charge anything simply for applying. However, should you be fully approved for a mortgage, there are associated closing costs for services and documents required by the lender that include, but are not limited to:
- Property appraisal: RBC will be responsible for hiring an appraiser to determine the market value of the property and to confirm it meets the property criteria for lending. However, you will be responsible for the cost. The price of an appraisal varies among provinces, housing markets, and appraisers ranging from $300 to as much as $700.
- Property survey: Mortgage lenders and real estate lawyers require a property survey as a condition of the mortgage loan approval, and before the title can be transferred to your name. The cost varies by province, market, and surveying company and can range from as low as $750 up to $1,300 or more.
- Mortgage default insurance: If your down payment is less than 20%, your lender will require you to obtain mortgage default insurance, usually through CMHC. The amount of your premium depends on the size of your down payment and the amount of the mortgage loan. The premium is typically added to your mortgage loan, but some borrowers choose to pay the premium in full upfront. Mortgage default insurance typically ranges from several thousand dollars and up.
- Home insurance: All lenders require mortgage borrowers to obtain home insurance as a condition of the mortgage. In Canada, the average cost of a home insurance policy is about $100 a month; $1,200 a year. However, the cost of premiums varies among providers.
For existing RBC mortgage borrowers, there is a hefty fee if you break your closed fixed-rate mortgage contract before the end of the term. RBC will calculate your prepayment penalty two ways, then charge the higher of the two:
- Three months worth of interest on the prepaid amount, at your current mortgage interest rate
- The Interest Rate Differential (IRD) method to calculate what percentage of the prepaid amount you must pay as a penalty for breaking your term.
For a variable rate mortgage, the prepayment penalty fee is much less. You’ll simply be charged three months’ worth of interest on the amount being prepaid at the current rate.
If you pay your mortgage off in full or transfer to another lender, you’ll be charged a mortgage discharge fee. This fee varies by province, but the average cost is about $250.
Mortgage payment options offered by RBC
RBC offers mortgage borrowers incredibly flexible repayment options. Beyond the standard monthly mortgage payment, other mortgage payment options include:
- Semi-monthly: Twice a month, typically the 1st and 15th. The total of 12 monthly payments is divided into 24 equal payment amounts.
- Bi-weekly: Every 14 days. The total of 12 monthly payments is divided by 26 equal payment amounts.
- Weekly: Every 7 days. The total of 12 monthly payments is divided by 52 equal payment amounts.
- Bi-weekly accelerated: Every 14 days. The standard monthly payment amount is divided by 2 and paid every 14 days, allowing for a built-in extra payment in a 12 month period.
- Weekly accelerated: Every 7 days. The standard monthly payment amount is divided by 4 and paid every week, allowing for a built-in extra payment in a 12 month period.
RBC mortgage prepayment privileges
RBC offers a “Double Up” feature that allows you to pay an extra amount towards your mortgage on every payment date. The minimum you can prepay is $100 up to the total amount of your regular mortgage payment amount. For example, if your monthly mortgage payment is $1,200, you can pre-pay an extra $100 to $1,200 on the same day your regular mortgage payment is due. Double Up payments are applied directly to your mortgage principal, allowing you to reduce the life of your mortgage and save on interest without incurring a mortgage prepayment penalty.
For closed mortgages, you can prepay up to 10% of your original mortgage principal once a year. When your mortgage comes up for renewal, you can make a prepayment of any amount you choose, there is no maximum amount or penalty.
For open mortgages, you can make prepayments of at least $500 or more as often as you want without penalty. Prepayments are applied directly to your principal balance.
You can also choose to increase the amount of your regular payment by 10% without having to pay any administration fees, and the extra amount is applied directly to the principle. For example, if your regular monthly mortgage payment is $1,200 you can choose to make your payment up to 10% higher at $1,320. In doing so, you are committed to that amount for the remainder of your mortgage term. You can increase the amount of your payment once every 12 months.
Most common RBC mortgages
RBC’s most popular mortgage product is the 5-year fixed-rate closed mortgage, followed by their 5-year variable rate mortgage. RBC Variable Mortgages come with a fixed mortgage payment. That means the amount of your payment will not change even when interest rates fluctuate. Instead, what will change is how your payment is applied to the principal and interest. When interest rates increase, more of your payment will go to interest, and less to the principle. If interest rates decrease, more of your payment will go to the principal, and less to interest.
The standard amortization period offered is 25 years. However, you can request an extended amortization period to a maximum of 30 years, but expect to pay a higher mortgage interest rate. According to their website, a 30-year mortgage comes with an interest rate 0.10% higher than the rate for 25-year amortization for the exact same mortgage.
RBC, along with the other chartered banks, also offer high-ratio-insured mortgages for qualified borrowers. If your down payment is less than 20%, you can obtain a CMHC insured mortgage through RBC as long as you meet the eligibility requirements and pass the mortgage stress test. The maximum mortgage amortization for a CMHC mortgage is 25 years. Therefore, the 30-year mortgage does not apply to these mortgages.
The next most popular mortgage product is the RBC Homeline Plan. This mortgage is available to buyers who provide a down payment of at least 20%, and to existing mortgage borrowers who have at least 20% equity in the property. This plan combines a traditional mortgage with a home equity line of credit (HELOC) into one product. As you pay down your mortgage balance, the amount of credit you have access to increases. You can access extra funds at lower rates than a traditional line of credit, without having to apply for new lending.
Specialty mortgages offered by RBC
In addition to the standard mortgage products available, RBC also offers four specialty mortgages:
- RBC Investment Property Mortgage for those looking to generate real estate investment income. RBC will finance up to 80% of the appraised value for a rental property at a competitive rate with flexible terms. It’s also available for those looking to convert their current home into a rental property, and parents looking to purchase a property for their child to live in.
- RBC Vacation Home Mortgage for those looking to purchase a second property, like a cottage for example. They’ll finance up to 95% of the purchase price with flexible mortgage terms to choose from, based on your needs.
- RBC Cash Back Mortgage is designed with new homebuyers in mind to help cover expenses like closing costs, moving, etc. Depending on the size and term of your mortgage, RBC will provide you with a cash advance up to 7% of the mortgage balance to a maximum amount of $20,000. The money is advanced to you on the day your mortgage loan is funded.
- RBC Self Employed Mortgage for those who are self-employed having a hard time getting a mortgage approval or accessing competitive rates. This type of mortgage allows applicants to use income from their business to be considered on their mortgage application, rather than just traditional employment income. If your most recent Notice of Assessment proves you have enough income to support a mortgage, and you meet their other eligibility criteria, RBC will finance up to 80% of a conventional mortgage, and up to 95% of an insured mortgage. Special refinancing options are also available to those who are self-employed.
Transfer your mortgage to RBC
RBC offers a special incentive for those interested in transferring their existing mortgage from their current lender over to RBC. When you switch your mortgage to RBC, they will cover the following applicable costs, to a maximum of $1,200:
- Title insurance fee
- Processing fee
- Mortgage discharge fee
RBC will not cover any prepayment penalty fees you may be subject to with your previous mortgage lender.
RBC Mortgage Pros and Cons:
✔️ Accessibility: There are over 1,300 branches across Canada if you need to speak to someone in person. You can apply for a mortgage either in-branch, over the phone, or online. Existing RBC customers can start the mortgage pre-approval process through the RBC banking app.
✔️ Application process: When you apply for a mortgage through RBC, you’ll be assigned a mortgage specialist dedicated to your file. They’ll walk you through the entire process and make sure you have everything you need and answer any questions you may have. You do not have to deal with many different people or navigate the process alone.
✔️ Specialty products available: RBC offers creative mortgage solutions for those with unique circumstances. New home buyers can apply for a type of mortgage that offers cash back to help with moving and closing costs, as well as a mortgage for those who are self-employed with difficult-to-prove income. RBC is the first in Canada to offer a mortgage product specifically designed to purchase a vacation home.
✔️ Rates are negotiable: RBC has been known to negotiate better mortgage interest rates for those who ask, depending on their credit score and financial profile. They have also been known to rate match if a competitor undercuts them for the same or similar mortgage product.
❌ Posted rates: Despite their size and market share, RBC does not offer the most competitive rates on the market. Sometimes they offer special rates as a sort of short-term “deal” but these are often comparable to their competitors regular posted rates.
❌ Prepayment options: Not as generous as their competitors who offer larger prepayment amounts with more flexible terms.
❌ Prepayment penalties: RBC will calculate the amount of your penalty two ways, three months’ worth of interest on the prepayment amount as well as the Interest Rate Differential (IRD) method, then charge the higher of the two. The IRD is almost always higher by several thousand dollars, making your prepayment penalty potentially very expensive.
❌ Customer service: According to consumer reviews on InsureEYE.com, RBC mortgage clients often complain about poor customer service. Common complaints include long wait times on the phone, slow to respond to emails, communication issues, and terms of mortgage not clearly or thoroughly explained.