Mortgage Myths For Potential Home-Buyers on February 12, 2021 If you’re a first-time homebuyer and are actively researching the real estate market and perusing mortgage rates in an effort to buy a new home, you might have seen some mortgage myths that weren’t entirely accurate during your research. If you have been unlucky enough to see mortgage myths and are even more confused now than ever before, Mortgage Assist has a dedicated team of mortgage agents and brokers that can guide you off the crooked path of those myths and into the straight path. The route to homeownership isn’t always an easy one, and the team at Mortgage Assist recognizes that. Inquire about the mortgage assist program to learn more about the many advantages it has to offer. What Are Some Of The Many Mortgage Myths Out there? Myth 1: In Canada, there is only a 30-year max amortization period If you’ve been browsing amortization periods in Canada and see this information, quickly dismiss it from your mind because it’s fake news. Even if you do leave a down payment of 20% or higher on a mortgage that isn’t insurance, the 35 and 40-year amortizations are still potentially available. In addition, the higher the down payment you leave, the lower your monthly payment will be throughout the course of the amortization. Myth 2: A down payment of 5% is mandatory This myth is partially true, but you can work your way around it if you can get the funds from an external source. There is something known as a cash-back mortgage. This is when a borrower is able to secure a cash advance after they receive approval for the loan. If you’re lucky enough, sometimes you can find cash-back offers of over 5%. You can then put this money towards the down payments on the home. One downside to this is the interest rates will be higher throughout the course of the mortgage. The minimum down payment in Toronto and other locations throughout Canada will be dependent on your financial situation, so it’s best to speak to your mortgage lender regarding this. Myth 3: Your personal bank always has the best mortgage rates You might initially think that your HSBC Canada mortgage rates are the best ones around. This isn’t true and banks know that loyal customers won’t shop around as much as other customers will. The posted mortgage rates are typically the first ones that are offered by banks. These posted rates will always have the highest interest rates as opposed to the one that the lender can offer after some negotiation is done. So, if you think that HSBC mortgage rates in Canada are the best ones out there, it’s wise to do a little shopping around first. Mortgage brokers bring in money from borrowers, and, as a result of the business that they bring in, they are able to offer and approve lower rates to those that meet the pre-approval standards. If you are looking at HSBC mortgages and nowhere else, then be sure to ask your mortgage lender the right questions to get the best rates. Myth 4: You have to pay for mortgage broker service If you’ve gone to a mortgage broker and they tried charging you, then you should walk the other way. Mortgage brokers don’t have a fee for the services they offer clients. There are only certain instances where a mortgage broker might include a fee. One situation where you might be charged is if you have a negative credit report and the loan you applied for is being denied. This means the mortgage broker will have to go through a private lending agency instead of a financial agency. Myth 5:I If you get a mortgage in Canada, they aren’t tax-deductible The interest you pay on a mortgage is tax-deductible if the income source is from a business or investments. Sometimes people like to work with a Home Equity Line of Credit or HELOC on around 80% of the value of the home. Suppose you use the money you’ve taken out to get another mortgage on a rental home you’re wanting to purchase. If you do that, the interest on the mortgage is tax-deductible. You’ll want to ensure that the earnings you make from the investments qualify all of the criteria for tax-deduction. If you just have a single property, then the above doesn’t apply in your situation. The only way to get tax-deductions on your mortgage is if the mortgage is through your business. An example of this is if you’re working remotely at the property or are using the property to rent out to tenants. Myth 6: If you get pre-approved for a mortgage, you’re sure to get the money Some people think that just because you’ve been pre-approved, the rest of the process will go smoothly and that you’ll receive guaranteed mortgage approval with no questions asked. This isn’t the case. A mortgage agreement can end up not working out at any point due to different factors. The pre-approval isn’t the last step in the mortgage application process and shouldn’t be treated as such. After the pre-approval, the mortgage lender will still have to go through all of your submitted documentation for verification purposes. If you’re going for a high-ratio mortgage that has a down payment of under 20%, then the insurer will be the one that gives the green light. When you’re making a final offer on real estate, you’ll always want to have a contingency on the offer. That way, you won’t be responsible for it if something doesn’t go as planned. Myth 7: Bankruptcy usually ruins any chances you have at securing a mortgage If you’ve declared bankruptcy, you might be thinking that you’ll never qualify for a mortgage. This isn’t true. There are certain mortgage lenders out there that specifically provide mortgages to people that have declared bankruptcy. If you’ve recently declared bankruptcy, you should get a credit card so that you can begin growing your credit rating again. Myth 8: Having a bad credit report will always disqualify you for mortgage approval This is false and there are also mortgage lenders that specialize in people that don’t have a good credit rating. They are known as ‘B’ and ‘C’ lenders. If you do have a poor credit history, then there’s a good chance that you’ll have to include a higher down payment. You’ll also potentially have higher interest rates because of the risk involved in lending to you. Myth 9: If there are any penalties charged to me to exit my mortgage agreement, I might as well just be patient and wait until the term is over Even though penalties can incur, it’s not always best to just bide your time and wait until the mortgage term is done. If there is a total of $300,000 left on your fixed-mortgage rate of 5%, then there would be a total of three years remaining on the term before you’re even able to consider negotiating. If you pull out a mortgage calculator and punch in the numbers, that will equal $43,155 of interest fees paid throughout the course of three years. If you decided to change over your mortgage to a rate of 3.49%, then your resulting interest fees would only be around $30,000. Before you make an impulse decision and switch over, you’ll want to carefully calculate how much you’ll be saving. You need to compare the amount of money in penalties that will incur to the savings. If you do decide to switch, some mortgage lenders take care of the penalties. Myth 10: Financial advisors are the best way to find a good mortgage Many people think their financial advisors are skilled in everything related to finances, including mortgages. This isn’t always the case. The skillset of financial advisors mostly related to investments and insurance. They aren’t licensed or trained in the areas of mortgages, so it’s best to go to a mortgage broker instead. Whenever you see information online, it’s best to double-check it with other sources before just believing it. It’s also good to keep a list of questions regarding the information you read and then asking your mortgage lender about it. A mortgage lender is specialized in exactly that, so they would be the best ones to go to for advice.