Common Mistakes People Make When Applying for a Mortgage
Purchasing a picturesque new home can create the beautiful lifestyle that you’ve always desired for you and your family. However, to secure your dream property, you first need to find a suitable lender, which can be challenging if you’re unfamiliar with the mortgage process.
Consequently, if mistakes get made while signing the paperwork due to not negotiating the best terms and conditions, you could end up facing substantial financial woes and even lose your home.
So, to help you avoid some basic errors that could prove to be costly, Kirk Eaton Mortgage has put together a list of the most common mistakes people make when applying for a mortgage.
1. Solely focusing on mortgage interest rates
While the mortgage interest rate is essential, it’s not the only aspect that borrowers should consider. It’s also critical to know the finer details of your mortgage.
One of the many details that gets typically overlooked is prepayment penalties, which is applied if you pay off your mortgage before the maturity date. It’s a common scenario for low-rate mortgages which are usually closed ones.
Focusing on rate alone to save a few hundred dollars annually can be a big mistake as the penalties to break that specific mortgage could end up costing thousands more down the road.
Therefore, borrowers need to KNOW THEIR MORTGAGE inside and out, which can be best explained by a mortgage professional. Here are some key questions to ask your bank or lender: How are the penalties calculated if I break my mortgage before maturity? How is the interest rate differential penalty calculated? Can I port my mortgage to a new property if I decide to sell?
2. Thinking that the bank is the only lending option
Many borrowers think they have to get “AAA” financing and rates through one of the major banks. They also feel that mortgage brokers only offer subprime lending and high mortgage rates, which is not true.
Most mortgage brokers have access to dozens of “A” lenders, including some big banks like TD and Scotiabank. So, why put all your eggs in one basket and apply to just your bank? By talking to a licensed mortgage agent it will allow you to make an informed decision while receiving unbiased advice and access to various lenders.
3. Not accounting for closing costs
To secure a home purchase, there are additional costs to close a real estate transaction. Not only is the minimum down payment required (5% for purchases up to $500,000), but the buyer will have to pay for legal fees, title insurance, PST on default insurance (if applicable), and land transfer taxes.
Land transfer taxes can be expensive, especially when purchasing in the municipality of Toronto. In Toronto, a buyer will pay both provincial and municipal land transfer taxes, while outside of Toronto’s municipality, only provincial applies.
As a result, a buyer needs to speak with a real estate agent or mortgage broker to break down these additional costs for them. The last thing a buyer wants is to realize that they don’t have enough money to close the transaction after an offer has been accepted.
To avoid these and other mistakes, reach out to Kirk Eaton Mortgage in Burlington, Toronto, Ontario. My strategic approach allows me to create the optimal solution for each situation.
My services include mortgage pre-approval, home purchase mortgages, mortgage refinance, and mortgage transfer. I also offer alternative and private mortgage lending, self-employed mortgages, mortgage renewals, and bad credit mortgage services to my clients.
I serve clients across Ontario and Canada and specialize in the local markets of Toronto, Burlington, Oakville, Mississauga, Hamilton, and the GTA.