Homebuyers: Avoid These Common Mortgage Pitfalls

Marci • December 12, 2018

A home is the largest purchase most people will make in their lives.

That should reinforce the importance of planning ahead, doing your research, relying on the advice of experts and not rushing through the process.

With nearly 700,000 homes purchased in Canada each year, there’s no shortage of anecdotes about the issues and surprises that can arise.

While a mortgage broker can help you avoid many of the pitfalls commonly encountered during the home buying process, it’s still important to be informed even before you start looking for that perfect home. Here are just a few examples:

 

1. Not checking your credit report before applying for a mortgage

Put simply, not knowing your credit score prior to applying for a mortgage is akin to not brushing your teeth before visiting the dentist.

Your credit score can have a huge impact on the best rate you’ll be able to secure. For example, some lenders will offer a borrower with a 640 credit score rates that are a full 0.25% worse than someone with a score of 750, as we’ve  written about  previously on these pages. For conventional mortgages (those with down payments of less than 20%), the ideal target score is around 720.

You don’t want to discover your credit score is sub-par in the middle of a mortgage application. Knowing this information beforehand gives you time to improve your score, or address any errors that may appear on your report. You can easily check your score through  Equifax  or  TransUnion.

Anyone with a credit score less than 680 (the minimum credit score to get the best rates) should be prepared to pony up for a higher interest rate and will likely qualify for a smaller mortgage.

 

2. Thinking it’s all about the rate

Let’s be honest, who doesn’t want the cheapest mortgage rate possible? And indeed it is important to find the best deal that meets your needs. After all, a few percentage points can make a not-insignificant difference to your interest costs over your mortgage term.

But don’t be too quick to jump at the cheapest rate without making sure it has all of the features you need/want, and that it doesn’t stick you with higher-than-normal penalties should you need to break your mortgage early. Some people are OK with a large penalty if it saves them money upfront on the rate. Just remember that penalties on certain “no-frills” mortgages can end up costing  many  thousands of dollars, nullifying any rate savings.

 

3. Not understanding the importance of the down payment

Many first-time buyers see a down payment as a big, almost-insurmountable obstacle to home ownership, particularly in regions where prices have skyrocketed into the stratosphere.

But when you get into the nitty-gritty of it all, there are many more considerations beyond simply coming up with the money.

Things to consider:

  • How big of a down payment will you/can you make? Of course you must meet the federally mandated minimum down payment: 5% for all mortgages up to $500,000, and 10% on any portion above $500,000 up to $1 million (CMHC-insured mortgage loans are only available on properties valued under $1 million). It goes without saying that as you increase the size of the down payment, you reduce the amount of interest over the lifetime of the mortgage. But you also reduce the size of the  CMHC mortgage insurance premium , which runs from 0.60% on loan-to-values up to 65%, all the way up to 4% for loan-to-values of 95% (i.e. 5% down). CMHC says the average down payment in 2016 was 8%, while the average CMHC-insured loan was $245,000. Based on those figures, the average premium was $9,016. Remember, this premium is normally rolled into the mortgage, and gets paid off (with interest) over the life of the mortgage.
  • The source of your down payment funds. According to Mortgage Professionals Canada, about 10% of first-time buyers use the federal government’s  Home Buyer’s Plan  to withdraw up to $25,000 tax free from their Registered Retirement Savings Plan (RRSP). This can be a great tool for supplementing a down payment, so long as you’re aware of the rules and the payback requirements.
  • Transferring the funds. No matter where your down payment funds are coming from (savings, investments, RRSP, proceeds from a prior sale), be sure to leave yourself plenty of time for the funds to clear and for a certified or cashier’s cheque to be produced before the closing. It’s easy to underestimate the time it may take for wire transfers to finalize, so be sure to confirm with your bank or financial institution in the event of a tight deadline.

 

4. Not setting (and sticking to) a budget

You’re probably thinking, “but budgets can be boring and tedious.” This is not entirely incorrect, but on the other hand a budget paints a clear picture of your financial situation and lays the framework for ensuring you can afford all of the hidden (and not so hidden) costs associated with buying a home—not to mention all of the costs that follow after the closing.

It’s important to plan for both the short and long term. Short-term costs include everything from:

  • Land transfer taxes
  • Legal fees
  • Home inspection/appraisal fees
  • Down payment (this is kind of a big one)
  • Mortgage insurance (remember, the provincial tax on your insurance premium can’t be rolled into the mortgage like the premium itself, so expect this hefty expense at closing time)

Then there are the ongoing costs of home ownership. Previous owners will know what to expect, but first-time buyers may be caught off guard with sudden expenses after moving in, such as:

  • Appliances and furniture
  • Condo fees/Property taxes/Property insurance
  • Utility costs
  • Renovations/repairs (furnace replacement, new shingles, etc.)
  • And everything else, down to tools, and yes, even a dehumidifier. These expenses can add up

As for long-term planning—and this applies especially to today’s buyers—just because you scored a great rate for your purchase, be prepared for the possibility that rates will rise and that you may need to renew into a higher rate in the future.

For every 25 bps or rate increases, adjustable-rate holders can expect to pay approximately $25 more in interest each month based on a $200,000 mortgage.

 

5. Not Shopping Around

Whether you plan to find your own mortgage or enlist the help of a broker, it’s still important to shop around in both cases.

Most people don’t buy the first car they test drive. They give themselves adequate time to research and compare their options. So why would a purchase worth many times the cost of your vehicle be any different?

If you have questions about any of these issues, or about the mortgage application process in general, I’d love to discuss it with you. Please don’t hesitate to contact me anytime!

 

This article was written by Steve Huebl from Canadian Mortgage Trends. It was originally published here on July 21,2017. 

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How To Get A Mortgage After Bankruptcy

By Marci Deane • July 2, 2025
Sometimes life throws you a financial curveball. Bankruptcy and consumer proposals happen. It doesn’t mean your life is over, and it doesn’t mean you won’t ever qualify for a mortgage again. The key to financial success here is getting things under control as quickly as possible. You must demonstrate to the potential lenders that what happened in the past won’t happen again in the future. So if you’re thinking about getting a mortgage post-bankruptcy, lenders will want answers to the following questions: How long have you been discharged? Securing a mortgage will be dependent on how long it has been since you were discharged from your bankruptcy or consumer proposal. Most lenders consider the discharge date on both to be your new ground zero. And while there is no legally defined waiting period for when you can apply for a new mortgage post-bankruptcy, what lenders will assess is how you’re managing your finances after your financial troubles. Have you established new credit? You can show lenders that they can trust you after bankruptcy by establishing new credit and managing that credit flawlessly. So as soon as you’ve been discharged, it’s a good idea to get a secured credit card and start rebuilding your credit score. To be considered completely established, you’ll want to have two years of credit history on two trade lines with a credit limit of $2500 on each trade line. You’ll also want to make sure that you have no late or missed payments. How much do you have available for a downpayment? The more money you have to put towards purchasing a property, or the more equity you have in your property in the case of a refinance, the better your chances of getting a mortgage. The more money you bring to the table, the more comfortable a lender will feel about the risk they take of losing their investment should you run into future financial difficulty. What is your total debt service ratio? Another consideration lenders will look at is how much money you make compared to the cost of making your mortgage payments. So it probably goes without saying that the more money you make compared to the amount you want to borrow, the better. Conventional or insured financing. If you’re looking to get the best mortgage products available, here are some of the things a lender will want to see: You’ve been discharged for at least two years plus a day. You’ve established your credit (as listed above). You have at least 5% down for the first $500k of the purchase and 10% down for anything over $500k. If you don’t have a 20% downpayment, you will be required to secure mortgage insurance through CMHC, Sagen (formerly Genworth), or Canada Guaranty. The cost to service the property and all your debts don’t exceed 44% of your gross income. Alternative lending As independent mortgage professionals, our job is to provide solutions and strategies for our clients. As such, in addition to dealing with many traditional lending institutions, we also have access to lenders who specialize in working with clients whose financial situation isn't all that straightforward. These private lenders offer alternative lending solutions that consider the overall strength of your mortgage application. While you won’t qualify for the best rates and terms on the market by going with an alternative lender, if you’re looking for options, you might find that alternative lending is a very reasonable solution for you. Alternative lending isn’t for everyone, but it’s an excellent solution for some, especially if you’ve gone through a bankruptcy or consumer proposal and need a mortgage before fully establishing your credit. Get in touch anytime. So whether you’re looking for a plan to help you qualify for a mortgage with the most favourable terms or if you need something more immediate. Please connect anytime. It would be a pleasure to outline your options and work on a plan to get you a mortgage.

What You Need to Know From the CMHC 2025 Housing Market Outlook

By Marci Deane • June 26, 2025
The Canada Mortgage and Housing Corporation (CMHC) has just dropped their highly anticipated 2025 Housing Market Outlook, and if you’re a homeowner, future buyer, or just like to keep your finger on the real estate pulse, there’s a lot to unpack. Here’s the short version: The Big Picture (Canada-Wide) Mortgage rates are expected to decline in 2025, giving some long-awaited relief to buyers. Home sales and prices are heading back up, though we’re not expecting the wild ride of 2021. Rental markets are softening slightly with more supply coming online. Condo construction is slowing, while purpose-built rental and ground-oriented housing hold strong. CMHC is cautiously optimistic, but they’re also tracking risks like U.S. trade tensions and lower immigration. What About British Columbia? If you’re in BC, especially Greater Vancouver or Vancouver Island, here’s what matters most: Prices are forecast to hit new highs by the end of 2025. Sales are rebounding, thanks to lower mortgage rates and some recent financing policy changes. Tighter inventory will drive demand in townhomes and entry-level properties. Rental markets are finally seeing some relief, with rising vacancy rates and record rental construction underway. Why It Matters This isn’t just “market noise.” For buyers, sellers, renters and industry pros, these trends point to a more balanced housing environment in the next 12–18 months. That means better planning opportunities, less panic-buying, and a slightly calmer market for everyone involved. If you’re making moves in the real estate world, or just want to understand what the data says about where we’re headed, this report is worth a closer look. ➡ Download the full 3-page PDF summary here . Need help making sense of how this impacts your mortgage, buying power, or investment strategy?  Ask Marci About Mortgages. I’m always happy to walk you through it.

Older Canadians Have Mortgage Options

By Marci Deane • June 25, 2025
Although it’s ideal to have your mortgage paid off by the time you retire, that isn’t always possible in today’s economy. The cost of living is considerably higher than it has ever been, and as a result, many Canadians are putting off retirement, hoping to make just a bit more money to add to that nest egg. So if you find yourself in the position where you’re considering your mortgage options into retirement, you’ve come to the right place. The advantage of working with an independent mortgage professional instead of a single bank is choice. When you work with an independent mortgage professional, you won’t be limited to an individual institution’s products; rather, you will have access to considerably more options. Here are some options available to older Canadians as they plan for mortgage financing through their retirement. Standard Mortgage Financing If you’ve got a steady income, decent credit, and equity in your home, there is no reason you shouldn’t qualify for standard mortgage financing, which usually comes at the lowest interest rates and best terms. Some lenders use pension and retirement income to support your mortgage application even if you’ve already retired. Reverse Mortgage Financing A reverse mortgage allows Canadian homeowners 55 years and older to borrow money from their homes with no proof of income, no credit check, and no health questions. A reverse mortgage is a fabulous mortgage solution that has helped thousands of older Canadians enhance their lifestyle. Home Equity Line of Credit (HELOC) A line of credit secured to the equity you have in your home is an excellent tool to allow you to access money when you need it but not pay interest if you don’t need it. Many older Canadians like the idea of rolling all their expenses and income into one account. Private Financing If you happen to be in a bit of a tight spot, you have a plan but need a financial solution; private financing might be the answer. Indeed not the first choice for many because of the higher interest rates. However, private financing can provide you with options where a traditional bank can’t. If you have any questions about securing mortgage financing for your retirement, please connect anytime. It would be a pleasure to work with you and walk you through all your options.