Mortgage myths our friends and families tell us

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Our family and friends always mean well when trying to give us advice about our first home, 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 mortgage myths that we hear of:

“The market is going to crash”

We have been hearing this for decades now over and over again, but it still has not entirely happened. Just because well-meaning people like parents and grandparents think you’ve paid too much for your home and warn you that the market is going to crash, does not mean it will. Do not miss your opportunity.

It is understandable that headlines like “Canadian house prices to climb further, crash fears rising” don’t really help solidify your decision. But the Globe and Mail article that went with this headline actually forecasted rising house prices beyond 2017, with some analysts who were polled for the article thinking “prices will only cool, dodging a U.S.-style nosedive.”

“We are in a bubble”

No we’re not! If you happen to put five economists in one room, you are very likely to get five different opinions. As a matter of fact, the Ottawa mortgage market is a significantly stable real estate market. Any concerns of a real estate bubble in Canada are focused around the Toronto and Vancouver condo boom. But even in those circumstances, opinions are divided.

“Variable rates are risky”

Variable rates require research and education. A 0.25 percent rate increase will raise your mortgage payment about $12 for every $100,000 of your mortgage. With this small detail in mind, payments on a $300,000 mortgage will only increase up to about $36 which isn’t so bad.

“You need more than 5 percent down if you aren’t a first time home buyer”

This is a very common belief for some odd reason. There happens to be an assumption that if you are not a first time home buyer, you need a minimum of a ten or fifteen percentdown payment. This really is not true. It does not matter whether you have owned a home in the past or not. Regardless, anyone who qualifies can buy a home with a minimum of a five percentdown payment.

“You’ll be better off staying with your bank because they know you”

This simply is not true. You may walk into your local branch and be offered a mortgagewith a great discount below the posted rate, but you will be heavily penalized if you break that mortgage.

Banks are not sentimental or compassionate and they certainly do not reward loyalty. But they do know that people are loyal to banks, and they take advantage of that knowledge by sneaking in penalties and fees for unsuspecting customers. It is always better and very important to shop around.

“Avoid default insurance”

To avoid having to pay for CMHC default insurance, you need to have a minimum 20percentdown payment. But there is no point if you are going to clear out your savings account in order to reach 20 percent, leaving you house broke.There are so many little things you need to account for at closing time. People get so focused on the down payment and mortgage fees that they forget about the other expenses involved with buying a new home. Instead of having a cushion of savings on hand, they end up putting these expenses on their credit cards.

You are better offif you make a small default insurance premium so you have money available for movers, furniture, appliances, renovation and repairs. Even a lawn mower and snow blower are handy to have around and are worth the it as opposed to piling up credit card debt.

Your Ottawa Mortgage Broker

Family and friends…much love and respect. They mean well, but that does not always make them the most qualified mortgage brokers. Professional mortgage brokers have access to many different lenders across the country and are up to date with the most recent market trends and ever-changing mortgage regulations, developments and products.

Love your family and friends. But for your mortgage or first time home buying inquiries, choose your Ottawa Mortgage Broker.