Understanding the real facts about mortgages is crucial for making informed decisions that can save you time, money, and stress. Unfortunately, there are many myths out there that can lead to confusion or missed opportunities. In this newsletter, we’ll debunk some of the most common mortgage myths.
 

Myth #1: You Need a 20% Downpayment
While it’s true that a 20% downpayment can help you avoid mortgage loan insurance and reduce your monthly payments, it’s not a hard and fast rule. There are several loan options available that require much lower downpayments as long as you have insurance. For example, Canada has three mortgage insurance companies CMHC, Sagen, and Canada Guaranty which allow you to put down as little as 5% if the house is under one million dollars. If the home you are looking to purchase is over one million dollars, the minimum down is 20%. Don’t let the 20% myth hold you back from exploring your options.

Myth #2: Prequalification and Preapproval Are the Same
It’s easy to confuse prequalification with preapproval, but they serve different purposes. Prequalification is an initial estimate of how much you might be able to borrow, based on self-reported information. It’s a useful starting point but not a guarantee. Preapproval, on the other hand, involves a thorough credit and financial check, providing a more accurate and reliable estimate of your borrowing power. This can make a significant difference when you’re ready to make an offer on a home.

Myth #3: You Can’t Get a Mortgage with Student Loans
Many people believe that having student loans automatically disqualifies them from getting a mortgage. However, if you meet the required ratios and have a good credit history, student loans do not have to be a barrier to homeownership. Lenders consider several factors, including your debt-to-income ratio, credit score, and employment history. To improve your chances, focus on reducing existing debt and avoiding new loans. Maintaining a good credit score by making timely payments on your student loans will enhance your mortgage application. With diligence and the right strategy, balancing student loan payments and securing a mortgage is within reach.

Myth #4: The Lowest Rate Is Always the Best Option
While securing the lowest mortgage interest rate may seem like the best option, it’s essential to consider the bigger picture. A lower rate can be enticing, but it often comes with trade-offs such as higher fees, or less favorable loan terms. It’s crucial to evaluate the overall cost of the mortgage, including closing costs, fees, and the loan’s duration. Sometimes, a slightly higher interest rate might come with better terms, such as lower closing costs or more favorable repayment options, which could be more beneficial in the long run.

Myth #5: You Should Always Choose a 30-Year Fixed Mortgage
The 30-year fixed mortgage is popular for its stability and predictability, but it’s not the only option. Depending on your financial situation and goals, a 15-year fixed mortgage or an adjustable-rate mortgage (ARM) might be more beneficial. For example, a 15-year mortgage can save you money on interest and help you build equity faster, while an ARM might be advantageous if you plan to move or refinance within a few years.


Understanding the realities behind these common mortgage myths can empower you to make better decisions and take advantage of the opportunities available to you. If you have any questions or need personalized advice on your mortgage needs, don’t hesitate to reach out to our team.