Mortgage Myths Debunked – What Lenders Don’t Want You to Know

When it comes to getting a mortgage, everyone has an opinion—your neighbor, your co-worker, even your friend who just bought their first home. The problem? Most of what people believe about mortgages isn’t entirely true.

From the idea that you must have 20% down to thinking banks always offer the best rates, there are plenty of myths floating around that could be costing you money or keeping you from homeownership altogether.

Today, we’re busting the most common mortgage myths so you can make informed decisions and save thousands in the process.

---

Myth #1: You Need 20% Down to Buy a Home

For years, people have believed that you need at least 20% down to get a mortgage. While putting 20% down can have benefits, it’s not a requirement—and for many people, it’s not even the best option.

The Truth: You Can Buy a Home with as Little as 5% Down

In Canada, the minimum down payment depends on the home’s price:

• 5% down on homes up to $500,000
• 10% down on the portion of a home between $500,000 and $1.5 million
• 20% down on homes over $1.5 million

Example: How a Smaller Down Payment Works

Lisa is buying a $600,000 home. Instead of needing $120,000 (20%), she can:

✔️ Put down $35,000 (5% on the first $500K + 10% on the remaining $100K)
✔️ Still qualify for competitive mortgage rates
✔️ Keep extra cash for renovations, investments, or an emergency fund

What About Mortgage Insurance (CMHC)?

Yes, putting less than 20% down requires mortgage default insurance (CMHC, Sagen, or Canada Guaranty). But here’s the surprise:

✔️ CMHC-insured mortgages often come with lower interest rates because the lender takes on less risk.
✔️ Instead of draining your savings, you can start building equity sooner.

So while 20% down eliminates mortgage insurance, a lower down payment doesn’t mean a bad deal—in fact, it can help you enter the market sooner and keep your cash working elsewhere.

---

Myth #2: Pre-Approvals Guarantee You a Mortgage

You’ve probably heard this one before:
"I got pre-approved, so my mortgage is 100% guaranteed."

Not quite.

The Truth: A Pre-Approval is NOT a Final Approval

A pre-approval is a lender’s estimate of what you might qualify for—but it’s not set in stone.

✔️ A pre-approval checks your credit and income, but it doesn’t include a full underwriting process.
✔️ Your approval can change if your income changes, debt increases, or mortgage rules tighten before you buy.
✔️ The lender still needs to approve the specific property you’re buying—especially for condos or unique properties.

Example: When Pre-Approval Falls Apart

Mike gets pre-approved for $600,000 with a 5% down payment. He makes an offer on a condo, but the lender rejects the deal because:
✔️ The condo building has high maintenance fees
✔️ The condo’s financials are too risky

Even though Mike had a pre-approval, the property itself didn’t meet lender requirements, so the deal fell through.

How to Protect Yourself:

✔️ Get a FULL approval before firming up a deal
✔️ Work with a mortgage broker who can check multiple lenders
✔️ Keep your financial situation stable until closing

A pre-approval is a great tool to estimate your budget, but always remember: final approval happens when you find a property and submit all documentation.

---

Myth #3: Banks Always Offer the Best Mortgage Deals

You’ve been with the same bank for years. You have a chequing account, savings, maybe even investments with them. Naturally, you assume they’ll give you the best mortgage rate and terms, right?

Wrong.

The Truth: Banks Are Not Always the Best Option

✔️ Banks only offer their own mortgage products, meaning limited options.
✔️ Mortgage brokers have access to dozens of lenders, including banks, credit unions, and monoline lenders (lenders that only do mortgages).
✔️ Monoline lenders often have lower rates, better prepayment privileges, and fewer penalties.

Example: How Shopping Around Saves You Money

Sarah’s bank offers her a 5-year fixed mortgage at 5.79%. She decides to check with a mortgage broker, who finds her a 5.34% rate from a monoline lender.

On a $500,000 mortgage, that lower rate:
✔️ Saves her $135/month on payments
✔️ Saves over $8,000 in interest over 5 years

By simply shopping around, Sarah saves thousands of dollars—with the same mortgage features.

When Banks Might Be Better:

✔️ If you qualify for a specialty mortgage rate as a high-income professional (e.g., doctors, lawyers)
✔️ If you prefer all your accounts in one place

However, for most borrowers, using a mortgage broker means more options, better rates, and better flexibility.

---

Final Thoughts: The Truth About Mortgages

Many homebuyers make decisions based on myths and outdated advice—and it can cost them time, money, and opportunities.

✔️ You DON’T need 20% down—you can buy with as little as 5% and still get a great mortgage.
✔️ Pre-approvals aren’t final—always get full approval before firming up a deal.
✔️ Banks aren’t always the best choice—shopping around can save you thousands.

The more you know about how mortgages actually work, the more money you can save over the long term.

Thinking about buying or refinancing? Let’s talk strategy to make sure you get the best deal possible.