Mortgage Myth Busters

Mortgage Myth Busters

Buying a home is an important decision. I’m here to provide guidance and knowledge to help you plan for a secure financial future through homeownership. With that in mind, here are a few myths about mortgages that are important to understand.

Mortgage Myth #1… My bank will give me the best mortgage rate
Banks profit from customer loyalty because loyal customers don’t “shop around”. A Bank of Canada study discovered that existing bank customers may not get as good of a deal than if they were a new customer. Most banks generally offer their “posted” rates first, which are significantly higher interest rates compared to what they are willing to negotiate. Mortgage brokers are given discounted rates due to the volume of business they bring to the lenders.

Mortgage Myth #2… I have to pay for a mortgage broker’s services
A mortgage broker does not charge the client; their services come at no cost. Only in complicated situations, a broker will charge a small fee, such the client being denied a mortgage due to bad credit, forcing the broker to source through private lending and not a financial institution or monoline lender.

Mortgage Myth #3… You must have a 5% down payment saved
Not true! Although a down payment of at least 5% is mandatory, there is a way to receive the funding for it externally. If you don’t have the full down payment saved, you may want to consider a flex down (borrowed down payment) product. Your down payment can also come from a financial gift provided by a family member. There are many other factors that determine how much down payment you will require.

Mortgage Myth #4… A pre-approval means the money is guaranteed
Lenders don’t just approve you for a mortgage; they also have to approve the property you are buying. For this reason, a pre-approval is not always a sure thing. In the case of a “high-ratio mortgage” where the down payment is less than 20 percent, the default insurer (such as CMHC) provides the final mortgage approval. Default insures do not do pre-approvals. It’s always a good idea to add the condition “subject to financing” to your offer to purchase. In the event that your financing falls through, you won’t be under any obligation to pay for the property.

Don’t let mortgage myths get in your way of purchasing a new home. If you have any questions about mortgages, feel free to contact us.

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