Regarding mortgages, misconceptions can cloud your judgment when you purchase a property. Northwood Mortgage debunks the five most common mortgage myths to help you make the best decisions on your real estate journey. So, let’s go ahead and separate fact from fiction and shed light on the truth.
Myth 1: Mortgages? Only for those with flawless credit.
Yes, good credit helps. But it’s not the sole determining factor in qualifying for a mortgage. Lenders also consider your income, debt-to-income ratio, employment history, and the amount you have set aside for your down payment.
So, while a higher credit rate may result in a more favourable mortgage rate in Toronto, options are still available for those with less-than-perfect credit scores.
Myth 2: You need a 20% down payment to purchase a home.
While it’s true that a 20% down payment can help you avoid paying mortgage default insurance, it’s not a mandatory requirement for purchasing a home in Toronto.
Mortgage options with lower down payment requirements are available, like insured mortgage programs offered by the Canada Mortgage and Housing Corporation (CMHC). These programs allow you to purchase a property with a down payment as low as 5%. Consult a mortgage professional who can guide you through the process and your best options to avoid pitfalls.
Myth 3: Fixed-rate mortgages are always better than variable-rate mortgages.
While fixed-rate mortgages provide stability and protection against interest rate fluctuations, variable-rate mortgages typically offer lower initial rates and the potential for savings if interest rates decrease (which may happen in 2024).
Consider your future goals, the current economy, and what you’re personally comfortable with when deciding. You’ll always feel better and more confident with an informed decision.
If you need help choosing between the two, plenty of established brokerage professionals would love to discuss the logistics with you.
Myth 4: It’s always good to refinance your mortgage.
Refinancing can be helpful. But it’s not suitable for everyone or every situation. This practice involves replacing your existing mortgage with a new one. You might do this to take advantage of a better interest rate, draw on your home’s value, or merge debt. However, refinancing comes with costs.
Closing fees and a longer payback time can have a financial impact. You must consider this before changing your mortgage for good.
Myth 5: Mortgage rates don’t change between lenders.
Fact: Mortgage rates in Toronto can differ. While the Bank of Canada sets the main interest rate, individual lenders can tweak their own. You may encounter similar rates amongst them, but there are often slight variations that can save you lots of money over the long term.
So, shop around and compare for the best mortgage rate and term.
Trust the Brokerage Professionals at Northwood Mortgage
Our professionals hope to provide clarity for homebuyers in Toronto by debunking these common myths. For more information about our mortgage rates and options or for a consultation, contact us at Northwood Mortgage.
We will guide you through the process, dispel any misconceptions, and help you find the perfect mortgage that aligns with your financial goals.
