Purchasing a home in Ontario is an exciting milestone, but navigating the mortgage process can be daunting.
Here are the top 10 mortgage mistakes Ontario homebuyers make - and practical tips to steer clear of them.
1. Not Checking Your Credit Score Early
Your credit score plays a huge role in securing a favorable mortgage rate. Many Ontario buyers wait until they’re ready to apply before checking their score, only to discover issues that could have been fixed earlier.
How to Avoid: Check your credit score at least six months before applying for a mortgage. Use free services like Equifax or TransUnion to review your report. If your score is low, work on paying down debt or correcting errors.
2. Skipping Pre-Approval
Some buyers start house hunting without knowing how much they can borrow, leading to disappointment when they can’t afford their dream home.
How to Avoid: Get pre-approved before shopping. A pre-approval shows sellers you’re serious and helps you set a realistic budget.
3. Overlooking Total Costs
Focusing solely on the mortgage payment ignores other costs like property taxes, insurance, and closing fees (e.g., Ontario’s land transfer tax).
How to Avoid: Budget for all homeownership costs. For example, Toronto buyers face a double land transfer tax (provincial and municipal).
4. Borrowing the Maximum Amount
Lenders may approve you for more than you can comfortably afford, especially in high-cost areas like the GTA.
How to Avoid: Stick to a budget that leaves room for unexpected expenses or interest rate hikes. A general rule is to keep housing costs below 30% of your gross income.
5. Not Shopping Around for Rates
Many buyers accept the first mortgage offer they get from their bank, missing out on better rates or terms.
How to Avoid: Compare offers from banks and credit unions. As your Ontario mortgage expert, I can shop the market for you to find the best deal.
6. Ignoring Fixed vs. Variable Rate Options
Choosing between a fixed or variable rate without understanding market trends or your risk tolerance can lead to costly surprises.
How to Avoid: Research both options and consider your financial goals. For example, variable rates may save money if rates drop, but fixed rates offer stability.
7. Making Big Purchases Before Closing
Taking on new debt, like a car loan, during the mortgage process can change your debt-to-income ratio and jeopardize your approval.
How to Avoid: Avoid major purchases or new credit applications until after closing.
8. Not Locking in a Rate
In a rising rate environment, failing to lock in a rate can lead to higher payments.
How to Avoid: Ask your mortgage expert or lender about rate holds, typically valid for 90–120 days.
9. Misunderstanding Mortgage Terms
Short-term mortgages may have lower rates but require renewal sooner, which can be risky if rates rise.
How to Avoid: Choose a term that aligns with your plans. For example, a 5-year fixed term is popular in Ontario for stability.
10. Doing It Alone Without Expert Help
Navigating Ontario’s complex mortgage market without guidance can lead to missed opportunities and costly errors.
How to Avoid: Work with a trusted mortgage professional who knows the Ontario market.
By avoiding these common mistakes, you can save thousands and make your home-buying journey in Ontario smoother.