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Based on my experience here are the 7 most common mortgage mistakes made by home buyers. Mistakes can cost you thousands of dollars. Fortunately our clients are exempt from these pitfalls.

1.       Overextending Yourself

Realtors often encourage buyers to purchase the most house they can afford, based on their ability to qualify. In a low interest rate market this can be very tempting. What happens however when that 3.75% five year mortgage jumps to 5.75% at renewal time. Can you afford a 50% increase in your monthly payments? Having a monthly payment that you are comfortable with, will give you peace of mind now and in the future.


2.       Discounting The Cost Of Bad Credit

Having poor credit not only makes it more difficult to qualify for a mortgage, you could be subjected to much higher interest rates or a larger down payment. Your habit of not honouring your financial commitments on time will end up costing you thousands in preventable interest payments. If you want to qualify for the best rates, pay your bills on time and don’t max out your credit facilities.


3.       Not Knowing Your Down Payment Options

Do you have the typical minimum 5% down payment required? If not, do you have an investment that could be cashed in? First time home buyers or those not owning a home for five years can tap into RRSP’s with no penalty. Do you have the ability to borrow the 5%? Do you know of a relative that will gift it to you? Will the vendor of the house you are purchasing assist you? Can you sell another asset like a vehicle? Get creative.


4.       Not Budgeting For Closing Costs

Transfer, tax, legal fees, title insurance, interest adjustments, appraisal fees, home inspections, home insurance and property taxes are examples of the type of additional expenditures you may need to incur before during or after closing on your home. A good rule is to budget 1.5% of your purchase price for legal and transfer taxes. Appraisals and home inspections will run in the $250-$300 range. Make sure you have accumulated these funds as well as your down payment, to avoid any surprises and disappointment.


5.       Not Getting Pre –Approved

There is nothing worse than finding the home you want and then finding out you cannot afford it. This wastes your time, your realtor’s time and lowers your enthusiasm when you are still thinking about those nicer homes you saw, but can’t afford. The pre-approval also shortens the time required to obtain your actual mortgage approval and allows you to lock into today’s rates now, should they increase during your search.


6.       Not Choosing The Right Mortgage Product

When it comes to getting a mortgage, there are a number of products and options to choose from including fixed rate, variable rate, interest only, open, closed, long term, short term, various amortization schedules, etc. Choosing the product that is best for you may be the most important financial decision you ever make. A mortgage is not only a mortgage; it is the corner stone of your financial and retirement plan. Given its importance, it is funny how most financial planners rarely talk about it. Reviewing these mortgage options with an unbiased mortgage agent -such as myself- could save you thousands of dollars.


7.       Believing The Bank Is Your Friend.

The bank is not your friend. The banks make millions of dollars off of unsuspecting consumers who simply don’t know of a better way to get a mortgage. Need proof? Have you ever renewed a mortgage with a bank? You will receive a letter in the mail asking you to select one of their current mortgage options, return the letter by the specific date and you are done. Simple right? Unfortunately the rates offered are not the best available in the marketplace, and no one has taken the time to review how the new mortgage fits into your overall financial plan. Unfortunately most people simply return the letter. The banks know this and that’s why they do it. At no cost to you, we shop the market to find the best lender, the best mortgage product, the best available rates, terms and an amortization schedule that fits your budget. Call or email today and we can get started in helping you towards a better financial future.


We welcome your comments.