Our family and friends mean well, but unless they’re mortgage specialists, they’re probably going to give you advice that’s more myth than fact.
Here are some of the most common ones.
“The market’s going to crash”
We’ve been hearing this for decades now, but it still hasn’t happened. Just because well-meaning people (like parents & grandparents) think you’ve paid too much for your home and warn you the market’s going to crash, doesn’t mean it will.
Certainly headlines like “Canada house prices to climb further, crash fears rising” don’t help. But the Globe & Mail article that accompanied this headline actually forecasted rising house prices beyond 2017, with some analysts polled for the article thinking “prices will only cool, dodging a U.S.-style nosedive.”
“We’re in a bubble”
No we’re not.
Put five economists in a room, and you’re going to get five different opinions. The fact of the matter is the Ottawa mortgage market is a very stable real estate market. Any concerns of a real estate bubble in Canada are centred on the Toronto and Vancouver condo boom. But even then, opinions are divided.
“Variable rates are risky”
Variable rates require education. A 0.25% rate increase will raise your mortgage payment about $12 for every $100,000 of your mortgage. So payments on a $300,000 mortgage will only increase about $36.
“You need more than 5% down if you’re not a first time homebuyer”
This is a common belief, and I don’t know why! There’s an assumption that if you’re not a first-time home-buyer, you need at least a ten or fifteen percent down payment.
It’s simply not true.
Regardless of whether you’ve owned a home or not, anybody who qualifies can buy a home with a five percent down payment.
“You’re better off staying with your bank because they know you”
No you’re not.
You might walk into your local branch and be offered a mortgage substantially discounted below the posted rate, but you’ll be heavily, HEAVILY penalized if you break that mortgage.
I had a recent client that was penalized $36,000 when the bank’s online calculator showed a penalty of $7,200.
Banks are not sentimental or compassionate. They don’t reward loyalty. But they know people are loyal to banks, and they take advantage of that knowledge by sneaking in penalties and fees on to unsuspecting customers.
“Avoid default insurance”
To avoid having to pay for CMHC default insurance, you need a minimum 20% downpayment. But there’s no point if you’re going to clear out your savings to reach 20% and leaving you short on cash.
There are so many things you need to account for at closing time. People get so focused on down payments and mortgages that they forget about the other expenses involved with buying a new home. Instead of having cash on hand, they end up putting these expenses on their credit cards.
I’d much rather see you make a small default insurance premium so you have money available for movers, furniture, appliances, remodelling and repairs, even a lawn mower and snowblower, rather than piling up credit card debt.
Your Ottawa mortgage broker
Family and friends; you gotta love them. They mean well, but that doesn’t make them qualified mortgage brokers.
I have access to over 40 different lenders across Canada. I continuously take training and attend workshops to keep up to date on ever-changing mortgage regulations, developments, products and trends.
Love your family. Keep your friends as your friends. But for your mortgage, choose your Ottawa mortgage broker.