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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Down Payment Options for Canadian Homebuyers

By Marci Deane • September 10, 2025
For most Canadians, the down payment is the biggest hurdle to homeownership. A down payment is the initial amount you contribute toward your property purchase, while the lender covers the rest through a mortgage. By law, Canadian lenders can only finance up to 95% of a property’s value, which means you’ll need at least 5% down to qualify. If you’re putting down less than 20%, your mortgage must be insured through one of Canada’s three default insurance providers— CMHC, Sagen (formerly Genworth), or Canada Guaranty . This insurance comes at a cost, but it can be rolled into your mortgage amount. The less you put down, the higher the premium. Since saving a down payment can feel overwhelming, it helps to know the different sources you can draw from. Here are the most common options available to Canadian homebuyers: 1. Savings & Personal Resources The most straightforward source is your own savings. Lenders will ask to see a 90-day history of the funds in your account. Any large deposits outside of regular payroll must be explained with documentation—such as the sale of a vehicle or a transfer from an investment account. This requirement isn’t just red tape; it’s part of Canada’s anti-money laundering rules. 2. Proceeds from the Sale of a Property If you’ve recently sold another home, you can use the proceeds as a down payment on your new purchase. Proof of the sale—such as the final statement of adjustments from your lawyer—will be required. 3. RRSP Home Buyers’ Plan (HBP) First-time buyers can withdraw up to $35,000 each (or $70,000 as a couple) from their RRSPs to put toward a down payment under the federal Home Buyers’ Plan . The funds are withdrawn tax-free, but they must be repaid over a 15-year period. This is a popular option for buyers who have been steadily contributing to their retirement savings. 4. Gifted Down Payment With today’s housing prices, many buyers turn to family for help. A parent or immediate family member can provide a gift that makes up part—or even all—of the required down payment. The lender will require a signed gift letter confirming that the money is a true gift (with no repayment expected) and proof that the funds have been deposited into your account. 5. Borrowed Down Payment In some cases, you may be able to borrow your down payment. This option is usually available only if you have strong credit and sufficient income. The payments on the borrowed funds are factored into your debt service ratios, so affordability is key. Lenders typically use 3% of the outstanding balance when calculating the additional payment. The Bottom Line A down payment doesn’t have to come from just one source—it can be a combination of savings, gifted funds, RRSPs, or other resources. What matters most is being able to show where the money came from and that it meets lender requirements. If you’d like to explore your options or learn how much you might qualify for, it’s never too early to start the conversation. Connect with us today—we’d be happy to help you create a plan and take the first steps toward homeownership.

The Source Of Your Downpayment Matters

By Marci Deane • September 3, 2025
If you’re looking to purchase a property, although you might not think it matters too much, the source of your downpayment means a great deal to the lender. Let’s discuss the lender requirements, what your downpayment tells the lender about your financial situation, a how downpayment helps establish the mortgage loan to value. Anti-money laundering Lenders care about your downpayment source because, legally, they have to. To prevent money laundering, lenders have to document the source of the downpayment on every home purchase. Acceptable forms of downpayment are money from your resources, borrowed funds through an insured program called the FlexDown, or money you receive as a gift from an immediate family member. To prove the funds are from your resources and not laundered money from the proceeds of crime, you’ll be required to provide bank statements showing the money has been in your account for at least 90 days or that you’ve accumulated the funds through payroll deposits or other acceptable means. Now, if you’re borrowing all or part of your downpayment, you’ll need to include the costs of carrying the payments on the borrowed downpayment in your debt service ratios. If you’re the recipient of a gift from a direct family member, you’ll need to provide a signed gift letter indicating that the funds are a true gift and have no schedule for repayment. From there, you’ll need to show the money deposit into your account. Financial suitability Lenders care about the source of the downpayment because it is an indicator that you are financially able to purchase the property. Showing the lender that your downpayment is coming from your resources is the best. This demonstrates that you have positive cash flow and that you’re able to save money and manage your finances in a way that indicates you’ll most likely make your mortgage payments on time. If your downpayment is borrowed or from a gift, there’s a chance that they’ll want to scrutinize the rest of your application more closely. The bigger your downpayment, the better, well, as far as the lender is concerned. The way they see it, there is a direct correlation between how much money you have as equity to the likelihood you will or won’t default on their mortgage. Essentially, the more equity you have, the less likely you will walk away from the mortgage, which lessens their risk. Downpayment establishes the loan to value (LTV) Thirdly, your downpayment establishes the loan to value ratio. The loan to value ratio or LTV is the percentage of the property’s value compared to the mortgage amount. In Canada, a lender cannot lend more than 95% of a property’s value. So, if you’re buying a home for $400k, the lender can lend $380k, and you’re responsible for coming up with 5%, $ 20k in this situation. But you might be asking yourself, how does the source of the downpayment impact LTV? Great question, and to answer this, we have to look at how to establish property value. Simply put, something is worth what someone is willing to pay for it and what someone is willing to sell it for. Of course, within reason, having no external factors coming into play. When dealing with real estate, an appraisal of the property will include comparisons of what other people have agreed to pay for similar properties in the past. You’ll often hear of situations where buyers and sellers try to inflate the sale price to help finalize the transaction artificially. Any scenario where the buyer isn’t coming up with all of the money for the downpayment, independent of the seller, impacts the LTV. All details of a real estate transaction purchase and sale have to be disclosed to the lender. If there’s any money transferring behind the scenes, this impacts the LTV, and the lender won’t proceed with financing. Non-disclosure to the lender is mortgage fraud. So there you have it; hopefully, this provides context to why lenders ask for documents to prove the source of your downpayment. If you’d like to talk about mortgage financing, please connect anytime; it would be a pleasure to work with you.

From Summer Shine to Fall Fine: Smart Home Projects to Tackle Before the First Frost

By Marci Deane • August 28, 2025
As patios wind down and pumpkin spice ramps up, fall is the perfect reset for your home—and your homeowner game plan. These quick wins boost comfort, curb appeal, and efficiency now, and set you up for a low-stress winter (and a strong spring market). 1) Safety & “silent leak” checks (Weekend-ready) Clean gutters & downspouts. Add leaf guards where trees overhang. Roof scan. Look for lifted shingles, cracked flashings, or moss. Seal the shell. Re-caulk window/door trim; replace weatherstripping. Test alarms. New batteries for smoke/CO detectors; add one near bedrooms. Why it matters: Prevent water intrusion and heat loss before storms roll in. 2) Heat smarter, not harder Furnace/boiler tune-up and filter change. Smart thermostat with schedules and geofencing. Draft hunt. Foam gaskets behind outlets, door sweeps on exterior doors. ROI tip: Efficiency upgrades lower monthly bills and can improve lender ratios if you’re eyeing a refinance later. 3) Fall-proof your yard (so spring you says “thanks”) Aerate + overseed + fall fertilize for thicker turf next year. Trim trees/shrubs away from siding and power lines. Mulch perennials and plant spring bulbs now. Shut off/bleed exterior taps and store hoses to avoid burst pipes. 4) Extend outdoor season (cozy edition) Portable fire pit or propane heater + layered blankets. Path/step lighting for darker evenings (solar or low-voltage). Weather-resistant storage for cushions/tools to preserve value. Neighborhood curb appeal: Warm lighting and tidy beds make a big first impression if you list in shoulder season. 5) Water management = winter peace of mind Re-grade low spots and add downspout extensions (2–3+ metres). Check sump pump (and backup). Look for efflorescence or damp corners in the basement. 6) Mini-renos that punch above their weight Entry/mudroom upgrade: hooks, bench, boot trays, closed storage. Laundry room tune-up: counter over machines, sorting bins, task lighting. Kitchen refresh: new hardware, tap, and under-cabinet lighting in one afternoon. Budget guide: Many of these land under a micro-reno budget—perfect for a modest line of credit. 7) Indoor air quality tune-up Deep clean vents and dryers (including the rigid duct). Add door mats (exterior + interior) to catch grit/salt. Houseplants or HEPA purifier for closed-window months. Fast Timeline (pin this to the fridge) Late August–September Gutters/downspouts, roof/caulking, HVAC service, lawn care, plant bulbs, exterior tap shut-off plan, path lighting. October Weatherstripping/sweeps, fire pit setup, organize mudroom/garage, test alarms, sump check, downspout extensions, dryer vent cleaning. Financing smarter: make your mortgage work for your home Annual mortgage check-in. As rates, income, and goals evolve, a quick review can free up cash flow or open options for a small fall project budget. HELOC vs. top-up refinance. For bite-size projects, a HELOC can be flexible. For bigger renos you plan to pay down, a top-up refi might make more sense. Bundle & prioritize. Knock out the high-impact, low-cost items first (air sealing, safety, water management) before the cosmetic upgrades. Not sure which route fits your fall plans? We’ll run the numbers and map the best financing path for your specific budget and goals. Quick Checklist (copy/paste) ☐ Clean gutters/downspouts; add guards ☐ Roof & flashing visual check ☐ Re-caulk, weatherstrip, add door sweeps ☐ HVAC service + new filter ☐ Aerate/overseed/fertilize; trim trees; plant bulbs ☐ Path & entry lighting ☐ Drain/bleed outdoor taps; store hoses ☐ Downspout extensions; sump test ☐ Dryer vent cleaning ☐ Mudroom/garage organization ☐ Schedule mortgage review / discuss HELOC vs refi Ready to make fall your low-stress season? Book a quick fall mortgage check-up—15 minutes to see if a small credit line or a tweak to your current mortgage could cover your priority projects without straining cash flow.