Nesto Mortgage Review 2024

Nesto offers an almost complete set of mortgage loans, including three and five-year fixed-rate and variable-rate mortgages.

Loan Types

Nesto offers fixed and variable-rate mortgages in terms ranging from two to ten years:

• two-year fixed
• three-year fixed
• three-year variable
• four-year fixed
• five-year fixed
• five-year variable
• seven-year fixed
• 10-year fixed

No matter what your situation is, Nesto likely has a mortgage for you. The company offers financing for:

• First-time homebuyers
• Repeat homebuyers
• Newcomers to Canada
• Renewals
• Refinancing
• Second mortgages

Furthermore, Nesto offers solutions for multiple different types of residential properties:

• Single-family homes
• Condos and townhomes
• New construction
• Second homes
• Vacation properties
• Owner-occupied investment/rental properties (up to four units)

Loan Minimum

To get a mortgage with Nesto, you will need to borrow a minimum of $125,000. If you need a smaller amount, consider a mortgage lender that offers home equity lines of credit (HELOC) as an alternative to a traditional mortgage.

Loan Maximum

Nesto doesn’t specify a maximum mortgage amount, but should be willing to provide financing for homes up to at least $2 million with a maximum loan-to-value (LTV) ratio of 80%.

Loan Servicing

As with the vast majority of mortgage lenders in Canada, Nesto services its own loans. If you choose Nesto for your mortgage, you’ll continue to work with them for the duration of your contract.

Nesto is best for people who have excellent income, good credit and want to save money on their mortgage. Nesto mortgages are best for:

• Well-qualified borrowers with good credit (650+ beacon)
• Borrowers with a minimum down payment of 5% or more
• People with verifiable employment income
• First-time homebuyers
• Repeat homebuyers
• People who want cash back from their mortgage

Nesto offers a 100% online application process that doesn’t involve visits to a branch and no dealings with third parties. Its mortgage agents don’t work on commission (although they do receive a quarterly bonus based on their results and the quality of their service) and they are there to answer your questions and walk you through the process. Nesto Minimum Borrower Requirements.

To qualify for a mortgage with Nesto, you’ll need to look like a bank’s ideal borrower:

• Minimum credit score of 650 for all applicants
• No prior bankruptcies or consumer proposals
• No missed payments on any loans or lines of credit
• Minimum down payment of 5% for properties under $1 million, and 20% for properties of $1 million and over
• Approximately 1.5% of the purchase price available for closing costs
• Maximum gross debt service ratio (GDS) and total debt service ratio (TDS) of 35% and 42%, respectively (may be increased to 39% and 44% for clients with excellent credit)

Minimum Credit Score

Nesto only offers mortgages to customers with good credit. You will need a minimum credit score of 650 to get a mortgage with Nesto and a minimum score of 680 to get its best features and rates.

Minimum Down Payment

You can get a mortgage from Nesto with the same minimum down payment offered by most Canadian lenders. You’ll need at least 5% down with a purchase price up to $999,999 and 20% down with a purchase price of $1-million or more. Note that you will have to pay for CMHC mortgage default insurance at your own expense if you purchase a home with less than 20% down.

Related: How Much Do You Need For A Down Payment On A Home In Canada?

Maximum Debt-to-Income (DTI) Ratio

Nesto considers two debt service ratios when qualifying you for a mortgage. Your gross debt service ratio, which compares your cost of housing to your income, must be no more than 39%. Your total debt service ratio, which includes your other debt obligations, must be no more than 44%.

There are no additional fees or gotchas when it comes to originating a mortgage. Nesto’s standard fees include:

Prepayment Penalty

Nesto allows you to voluntarily raise your monthly payment by up to 20%, and/or pay up to 20% of your mortgage in a lump sum each year. If you prepay more than that, or break your mortgage early, you’ll be assessed a prepayment penalty.

The amount of the penalty depends on your individual mortgage. For fixed-rate mortgages, Nesto uses an interest rate differential (IRD) calculation. Variable-rate mortgages are charged the industry standard of three months’ simple interest.

That is, an interest calculation that doesn’t include compound interest and is instead the principal of your mortgage payment multiplied by your interest rate and also multiplied by your mortgage term. It is a rough estimate.

Mortgage Discharge Fee

When you become mortgage-free (or choose to repay your Nesto mortgage in some other way), Nesto will charge you an industry-standard discharge fee of $300.

There are also some additional expenses you should be prepared for when getting a mortgage with Nesto. Your costs may include:

Real Estate Lawyer

A lawyer’s services are indispensable for arranging a mortgage in Canada. Depending on the complexity of your situation, you can expect to pay between $750 and $1,500.

Title Insurance

Title insurance provides necessary protection in case of a claim against the title to your home, which can be caused by surveying errors, encroachments, unpaid taxes, and third-party liens. The average cost of title insurance in Canada is $350.

Land Transfer Taxes

If you’re purchasing a home, you may have to pay land transfer taxes to the province and/or city. The amount depends on the value of the home; a $1-million home in Toronto will be assessed land transfer tax at a rate of 4%.

To apply for a mortgage with Nesto, you can begin online or on the phone.

The process begins with answering some simple questions about your needs. You’ll be asked for details on whether you’re purchasing, renewing or refinancing your mortgage, information about the property and information about you and any co-applicants.

From there, you’ll be assigned a mortgage agent who will walk you through the details of a conditional offer and provide a 150-day rate hold. Your mortgage agent will also answer any questions and work with you to make sure you’re selecting the right product for your needs.

When you’re ready to commit, you’ll be asked to sign some paperwork—first on your own, and then with your real estate lawyer. You’ll also be asked to provide some documents which may include identification, bank statements, proof of income, a pre-authorized debit authorization and an accepted agreement of purchase and sale on the home in question. Your Nesto mortgage agent will help you gather the information you need and make sure you don’t miss anything.

Assuming all goes well, your lawyer will work with Nesto to make sure the mortgage funds on time and the money goes where it needs to be.

Approval, Underwriting and Closing Timeline

Nesto promises a fast mortgage experience, but stops short of specifying a timeline for how quickly it can close your mortgage.

For the best results, allow at least 10 days from initial contact for your mortgage to close. It will take time to get approved, gather and submit your documents, pass underwriting and fund the mortgage. If you need a mortgage quickly, Nesto asks that you let them know about your timeline as early as possible so they can help you ensure your mortgage will be funded on time.

To qualify for a mortgage with Nesto, you’ll need to have good credit and meet a number of qualifying criteria.

Down payment and loan-to-value (LTV) ratio

If you’re buying a home, Nesto requires a minimum down payment of 5% for properties under $1 million, and 20% for properties worth $1 million or more. You’ll need to show that the money for your down payment has been in your bank account for a minimum of 90 days and comes from an approved source.
If you’re renewing or refinancing your mortgage, Nesto has a maximum LTV ratio of 80%.

Closing costs

If you’re purchasing a home, Nesto will want confirmation you have enough cash on hand to pay for closing costs in addition to your down payment. The industry standard is 1.5% of the purchase price of the home.

Income and debt service ratio

Nesto follows the same criteria as major banks, limiting your TDS and GDS to 39% and 44%, respectively. Your debt service ratios will be calculated based on the Bank of Canada’s benchmark qualifying rate, or 2.% higher than your actual contracted rate, whichever is higher.

Credit score

To get a mortgage with Nesto, you’ll need a minimum credit score of 650. The lender prefers applicants with a credit score of 680 or more with no missed payments and no past bankruptcies.
If you don’t have an adequate credit score to get a mortgage with Nesto, consider an alternative mortgage lender that specializes in bad credit mortgages.

Related: How To Get A Mortgage With Bad Credit In Canada

The property

Nesto also has qualifying criteria for the property in question. For the most part, Nesto only offers mortgages for owner-occupied residential properties with a maximum of four units.

What To Do If You Get Turned Down

If Nesto turns you down, your mortgage agent will give you an explanation of what went wrong and will help you correct the problem.

The most common reason for mortgages to be denied is underwriting errors. Your mortgage agent will help you identify if there was a problem like incomplete or missing paperwork and work with the underwriter to get you back on track.

If your application was correct and you still got turned down, it’s likely due to your credit or Nesto’s confidence in your ability to afford the mortgage.

In both cases, there are other lenders who may approve you for a mortgage even when Nesto says no. Look for an alternative mortgage broker or lender that specializes in bad credit mortgages to learn more about your options.

While Nesto ranks at the top of Forbes Advisor Canada’s list of the best mortgage lenders, it may not be the best for you. Consider how Nesto compares to these other major lenders.

BMO is one of Canada’s largest banks and a leader in the mortgage industry.

While Nesto publishes its best rates and doesn’t haggle, you’ll need to do some jockeying to get your best mortgage rate with BMO. You may also need to visit a branch to complete your application for a BMO mortgage—a step Nesto doesn’t require.

What BMO does have that Nesto doesn’t is home equity lines of credit (HELOCs). A HELOC allows you to borrow money using your home as collateral, with flexible borrowing and repayments similar to a credit card. Nesto doesn’t offer this product yet, so BMO still has an edge in that regard.

Equitable Bank is Canada’s biggest bank you haven’t heard of. What Equitable lacks in TV commercials and branches, it makes up for in the mortgage department by offering mortgages to Canadians who don’t quite meet the big banks’ criteria.

If Nesto turns you down for a mortgage, Equitable Bank may be a good second option. You’ll pay a higher interest rate, but you’re also more likely to be approved with fair credit, self-employment income or other minor imperfections that make it difficult to get a mortgage.

Learn more: Equitable Bank Mortgage Rates 2024

Tangerine is one of Canada’s best digital banks, and another option for an online-only mortgage experience.

When you’re shopping for a home, Nesto will hold their best mortgage rate for you for up to 150 days, a full month longer than Tangerine’s 120. You’ll probably get a better rate from Nesto as well, since Tangerine isn’t known for being terribly competitive in the mortgage space. (Its parent bank, Scotiabank, is very competitive however).

Once you have your mortgage, Tangerine offers better prepayment options to help you get mortgage-free sooner. Tangerine allows lump sum prepayments of up to 25% each year, compared with Nesto’s 20%.

Related: Tangerine Mortgage Rates 2024

If you already have a mortgage, Nesto may be a good choice for refinancing as it offers low rates and flexible options.

Whether you want to save money on your mortgage payment or access the equity in your home, contact Nesto to explore your refinancing options. Just keep in mind that your existing lender may charge an expensive prepayment penalty if you choose to break your mortgage early.

Loyalty to a big bank rarely nets the best deal on a mortgage. Instead, choosing the best mortgage lender means finding the right combination of rates and features for your needs.

To get the right mortgage for you, contact a mortgage broker who can help you compare mortgages from multiple lenders. Your mortgage broker can help you get the best rates, terms, prepayment options, and other features so you can be confident you have the right mortgage for you.

Affordability

Affordability is a key consideration when shopping for a mortgage. Two components contribute to how much you can afford: your down payment and your debt service ratio.

For the most part, you will want to have a down payment of at least 20% to afford a mortgage. For example, if your down payment is $200,000, you may be approved for a mortgage of $1 million.

You may still be approved with a down payment of less than 20% on the condition you purchase CMHC mortgage default insurance. The minimum down payment is 5% on the first $500,000, and 10% on the remainder to a maximum purchase price of $999,999. The minimum down payment on a $999,999 home works out to $75,000. Your default insurance premium will be up to 4% of the loan amount and rolled into your mortgage.

In addition to a down payment, you’ll need to prove that your housing cost will be no more than 39% of your income. To perform this calculation, Nesto will take the sum of your mortgage principal and interest, property taxes, and heating costs and divide it by your income. To be sure you’ll be able to continue making payments if your interest rate goes up, you’ll be qualified at the higher of the Bank of Canada benchmark qualifying rates (currently 7.04 %) or two percent higher than your contracted mortgage rate.

One final calculation adds your other debt obligations, like credit card and car payments, to your monthly housing cost. As long as you have good credit, you’ll be approved for the maximum amount that won’t push your total debt service ratio above 44%.

Accessibility

When shopping for a mortgage, you’ll want to choose a lender who makes things easy for you.

While all lenders will require similar paperwork and documentation, their processes aren’t all the same. Nesto’s mortgage application process is handled entirely online, meaning you don’t need to visit a bank branch to sign paperwork or endure a sales pitch.

If you’re not comfortable applying for a mortgage online, you might prefer another lender that makes it easy to work with a mortgage agent. Many lenders and mortgage brokers offer mobile mortgage agents who will meet with you at the place and time of your choosing, but Nesto currently does not offer this service.

Borrower’s Experience

Finally, the overall experience is important when arranging financing for the biggest purchase you’ll make in your life. Forbes Advisor Canada takes into account BBB ratings, TrustPilot ratings and other signals to determine how satisfied Nesto’s customers are.

Nesto is one of only a handful of mortgage lenders in Canada with a TrustPilot score over 3.5. And with human contact available every day of the week, you can rest assured that you’ll be able to get help from Nesto when you need it.

Forbes Advisor scores lenders based on criteria that have a meaningful impact on the cost of the mortgage, including borrower eligibility requirements, the variety of loan options and whether the lender had loan features that could affect the homebuying process either positively or negatively, such as prepayment privileges, a bona fide sales clause or whether a mortgage broker could act on your behalf with the lender once your mortgage is active (broker privileges).

The best lenders scored the highest based on the weighting in the following categories:

• Interest rate: 20%
• Loan options: 15%
• Timeliness: 15%
• Bonafide sales clause: 5%
• Broker privileges: 5%
• Prepayment privileges: 10%
• Penalties calculation type: 15%
• Customer service experience: 15%
• Lender discounts offered: 5 bonus points

Our focus on affordability, accessibility and key features that affect the homebuying process (like pre-approval time and closing time) is what we consider reflective of consumers’ top priorities when comparing mortgage lenders.

Lenders that don’t publicly display their interest rates online or operate in fewer than four provinces or territories were not eligible for review.