5 Common Mortgage Mistakes to Avoid in Canada

Thinking about buying your dream home? Before you get excited and put in an offer, avoid common mortgage mistakes Canada.

These mistakes could stop you from getting the keys to your new place. The process may feel overwhelming, but preparation helps. Know your budget and understand what lenders look for.

We’ll guide you through the key things to consider. With the right steps, you’ll be ready to seal the deal.

Let’s set you up for success in your home-buying journey!

1. Not Shopping Around for Mortgage Rates

One of the biggest mortgage mistakes in Canada is not comparing mortgage rates before committing. Many buyers go with the first lender they find, but this can be costly in the long run.

Why It's a Mistake:

Different lenders offer different rates, and even small differences can add up over the years. If you don’t take the time to compare, you might end up with a higher interest rate than necessary.

Solution:

Make sure to shop around for mortgage rates in Canada. Use comparison websites or talk to a mortgage broker to find the best deal. A lower interest rate can save you thousands of dollars over the life of your loan.

2. Ignoring the Importance of Mortgage Pre-Approval

Skipping the pre-approval process is a common mistake for first-time homebuyers in Canada. Without pre-approval, you might not know how much you can afford.

Why It's a Mistake:

Without a pre-approval letter, you risk looking at homes outside your budget or, worse, losing your dream home to another buyer who has been pre-approved.

Solution:

Before house hunting, get mortgage pre-approval in Canada. This process will give you a clear idea of how much you can borrow and show sellers you’re a serious buyer. 

You can read more about What is a Mortgage Pre-Approval and Why Is It Important in Canada? on our website for further guidance.

3. Overlooking Mortgage Insurance Costs

Many homebuyers make the mistake of not considering the cost of mortgage insurance, especially when their down payment is less than 20%.

Why It's a Mistake:

Mortgage insurance is required by the Canada Mortgage and Housing Corporation (CMHC) if your down payment is less than 20%. It adds to your monthly costs, and if you're not prepared for it, it can stretch your budget.

Solution:

If you're putting down less than 20%, factor mortgage insurance into your calculations. It’s important to understand how much this will cost and plan accordingly.

4. Making Down Payment Mistakes

A down payment mistake can significantly affect your mortgage. Some buyers underestimate how much they need for a down payment, while others don’t consider the source of the down payment.

Why It's a Mistake:

A smaller down payment means you’ll have to pay more in mortgage insurance. Plus, you might end up with a higher interest rate if your down payment is below 20%. Also, lenders may question the legitimacy of your down payment if it comes from an unfamiliar source.

Solution:

Aim for at least a 20% down payment to avoid mortgage insurance costs. If you can’t make that, be prepared for additional expenses. Always keep track of your down payment source, and ensure it's fully documented.

5. Submitting Incorrect or Incomplete Mortgage Documentation

Submitting incorrect or incomplete documentation is a common mortgage application mistake in Canada. This can delay your approval process or cause your application to be rejected.

Why It's a Mistake:

Lenders require specific documents to assess your financial health. If your documents are incomplete or incorrect, the approval process could be delayed or even denied.

Solution:

Make sure you have all required documents ready before applying for a mortgage. Here’s a quick checklist of what lenders typically need:

Conclusion

We’re passionate about guiding people through the mortgage process. Avoid changing anything that affects your finances between your offer and the closing date. 

Remember, getting a mortgage isn’t just about finding the lowest rate. It’s about buying a home you love and starting your journey as a homeowner. Your home is more than a financial decision—it’s where you’ll build memories and feel safe.

A good mortgage fits your needs and helps you achieve your dream of owning a home. Reach out to discuss your plans!