The mortgage world has changed a lot in recent years, but some myths just won’t go away. I keep seeing the same misconceptions pop up, and they could be holding you back from making the best financial decisions. Let’s set the record straight on some of the most common mortgage myths.
1. You Need 20% Down to Buy a Home
Not true! You can purchase a home with as little as 5% down. While this does mean paying mortgage default insurance, it’s still a great option for many buyers. Even if you’ve already purchased a home with 5% down in the past, you can do it again. Your down payment can come from a variety of sources, including:
– Savings (RRSP, TFSA, regular bank account)
– A gift from an immediate family member
– Borrowing from a line of credit or credit card
– The sale of an asset
– Even Bitcoin!
2. You Have to Requalify at the Stress Test Rate Upon Renewal
This was proposed in the last round of changes, but it didn’t happen. If you’re in good standing, your lender will send you a renewal offer—no requalification required. However, don’t just accept their first offer! Shopping around could save you thousands, and switching lenders is free.
3. A Pre-Approval Means You’re All Set
Getting pre-approved is a smart move before you list your home or start house-hunting—it can strengthen your offer in a competitive market. But it doesn’t mean you’re done. The lender will still need to verify income, financial health, and additional paperwork before giving the final approval. And remember: No big financial changes (like taking on new debt) until you take possession, or you risk losing your approval.
4. You Can’t Buy a Home with Bad Credit
You absolutely can. There are lenders who specialize in mortgages for those with lower credit scores. You’ll likely need a larger down payment, and the interest rates may be higher, but options exist.
5. Self-Employed? Forget About Getting a Mortgage
Many self-employed individuals take lower declared incomes for tax planning or business growth, which can make qualifying with traditional lenders tricky. However, there are lenders who look beyond standard income verification and can still help you secure financing.
6. My Bank Will Offer Me the Best Mortgage
Loyalty to your bank is great—until it costs you money. Many Canadians will visit multiple stores to find the best deal on a TV but take the first mortgage offer their bank gives them. Banks are businesses like any other, and their first offer isn’t always their best. Exploring other private lenders could lead to a better deal.
7. You Can’t Refinance Anymore
You sure can! While you can only refinance up to 80% of your property’s value, refinancing is still very much an option for homeowners looking to access equity.
8. A Home Equity Line of Credit (HELOC) Isn’t a Mortgage
I often hear people say, “I don’t have a mortgage, just a HELOC.” But a HELOC is a mortgage—it’s just structured differently. It still needs to be repaid under the terms agreed upon with your lender.
Understanding how mortgages really work puts you in the driver’s seat when making financial decisions. If you’re unsure about any part of the process, talking to a knowledgeable mortgage professional can make all the difference. Have questions? I’m here to help!