The Mistakes That Keep Showing Up
Mortgage planning mistakes often happen when a borrower signs, borrows, or changes a contract before comparing the full cost and qualification effect. The examples below show questions to ask before making those decisions.
Here are five mortgage-planning mistakes and practical questions to ask before applying, renewing, refinancing, or closing.
Mistake #1: Signing the Renewal Letter Without Shopping
What it looks like: Your existing lender sends you a renewal letter 60-90 days before your term ends. The letter contains a rate they're "happy to offer." You sign and mail it back.
Why it matters: A renewal offer may differ from other available options in rate, term features, prepayment privileges, and penalties. The financial effect depends on the balance, remaining amortization, term, and alternatives actually available to the borrower.
How to avoid it: Review the renewal well before maturity and request written comparisons of rate, term features, penalties, and switching costs. A rate hold may be available, but its duration and conditions vary by lender.
Mistake #2: Maximizing Tax Deductions Right Before Applying
What it looks like: You're self-employed or have rental income. Your accountant maximizes every legal deduction to minimize your tax bill. You then apply for a mortgage and discover your qualifying income is far below your actual income.
Why it matters: Reported taxable income can affect the amount a self-employed borrower qualifies for. The effect varies by lender, income history, business structure, debts, down payment, and property.
How to avoid it: If you are planning to buy, ask a mortgage professional what income documents lenders may require and discuss tax decisions separately with a qualified accountant. Do not change legitimate tax reporting solely on the assumption that it will produce a particular mortgage approval.
Mistake #3: Buying a Car Right Before (or During) Buying a Home
What it looks like: You're approved for a mortgage. You celebrate by buying a new car — financed, of course, $700/month payment. Then a few weeks later your final mortgage approval gets revisited and the lender pulls your application.
Why it matters: A new monthly debt payment changes debt-service ratios and can reduce the mortgage amount a lender is willing to approve. The exact impact depends on the full application and lender policy.
How to reduce the risk: Avoid new credit or debt where possible between pre-approval and closing, and disclose any material change in income, employment, debts, down payment, or credit to your broker and lender before completion.
Mistake #4: Choosing a Mortgage Based Only on Rate
What it looks like: One option has a slightly lower headline rate but more restrictive prepayment privileges or a different penalty calculation. The borrower chooses it without comparing the complete contract.
Why it matters: If a mortgage is repaid before term, its penalty method and contract restrictions can outweigh a small rate difference. Ask each lender to explain the applicable calculation and contract features in writing.
How to avoid it: Look at the whole product, not just the rate. Ask about the penalty method, prepayment privileges, portability and payment-increase options. A rate-and-feature trade-off may change total cost depending on the contract and how you use it.
Mistake #5: Refinancing Without Modelling Total Cost
What it looks like: Rates have dropped. Someone tells you "you should refinance to save money." You refinance, get the lower rate, and feel good about it.
What it costs: Depending on your situation, refinancing without proper modeling can actually cost you money. The penalty on your existing mortgage, appraisal fees, legal fees, and the cost of resetting your amortization can outweigh the interest savings.
Illustrative comparison: A lower new rate does not automatically create savings. Compare the projected interest and payment effect with the existing lender's written payout amount, legal and appraisal costs, any fees, and the effect of changing the amortization. Use the borrower's actual figures and proposed terms.
How to avoid it: Request a written total-cost comparison before refinancing. Include the payout amount, closing costs, proposed payments, projected interest over a common comparison period, and the effect of any amortization change.
The Common Thread
Look at all five mistakes. The common thread isn't financial literacy — it's not having the right conversation at the right time.
A conversation with a mortgage professional before a purchase, renewal, refinance, or new debt commitment may identify contract terms, qualification changes, and costs that deserve closer review. The borrower keeps the decision.
If you are approaching a renewal, considering a refinance, or planning a purchase, request a consultation to review your figures and the conditions that may apply.
Talk to a Local Mortgage Broker
Milka Lukacevic is a registered submortgage broker in British Columbia who works through TMK – Trusted Mortgage Knowledge Inc. She helps buyers and homeowners compare suitable mortgage structures, features, and total borrowing costs across available lender types.
Request a consultation or call (604) 340-7673. Approval, rate, terms, and any applicable fees depend on the borrower, property, lender, and transaction.
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