5 Mortgage Missteps That Could Cost Canadians Thousands

Getting a Mortgage? Avoid These 5 Costly Mistakes

When you’re navigating the mortgage process, the choices you make can have long-term financial impacts. From understanding job stability requirements to knowing how different lenders treat debt and rental income, being informed can save you thousands. Here are the five most common missteps Canadians make—and how to avoid them.

1. Switching Jobs? It Might Not Be a Deal-Breaker

Many people believe they need to stay in a job for a set period to qualify for a mortgage. But that’s simply a myth. Lenders often prioritize continuity and professionalism over arbitrary timelines. If you’re a qualified applicant with stable industry experience and strong credit, many lenders will still consider you for a mortgage, even if you’re starting a new job.

Tip: Be upfront about your employment changes and keep proof of income or an offer letter handy. In some cases, lenders will even work with you if you switch roles before closing.

2. Self-Employed? There’s More Than One Way to Qualify

For business owners or contractors, mortgage qualification can seem tricky, but it’s far from impossible. While conventional banks may ask for two years of tax returns, some lenders can consider recent income increases, and certain professions (like medical fields) may even allow income projection.

Action Point: Don’t settle for the first option your bank suggests. Explore alternative lenders or mortgage advisors who understand the complexities of self-employment income structures.

3. Using Child Tax Benefits as Income? Absolutely

Child tax benefits are often overlooked as a source of income, but they can make a substantial difference in mortgage applications. Most lenders will allow you to count this benefit if your children are under a certain age, typically under 12 or sometimes under 14.

Reminder: Always check the eligibility age for using child tax benefits, and ensure they are directly deposited and visible in your tax records. This could be a game-changer for your application.

4. Misunderstanding Debt: A Common Pitfall

The way lenders view debt can vary significantly. While secured debts like car loans are based on actual monthly payments, unsecured debts (like credit cards) might be calculated differently, often at 3% of the balance. This can greatly impact how much you qualify for.

Key Insight: Different lenders treat debt differently, so shop around if you have varying types of debt. This is especially important with secured lines of credit or home equity loans, as some lenders may view these debts more favorably.

5. Rental Income—Use It Wisely

Buying a property with rental potential? Rental income can help you qualify for a higher mortgage amount, but lenders have differing approaches. Some will consider a portion of estimated rental income, even without a lease, while others require it to be documented in tax returns.

Bonus Tip: Rental income can sometimes be used from properties you own and are moving out of. Make sure to clarify with your lender on their specific rules, as this can affect your borrowing limit significantly.

Final Thoughts

The guidelines for mortgage qualification are diverse and can vary significantly between lenders. Taking time to understand these nuances, especially if you’re self-employed, changing jobs, or have varying types of debt, can unlock additional financial potential.

Empowered Mortgage Tips Recap:

• 💼 Changing jobs doesn’t necessarily mean disqualification.
• 📈 Self-employment income has flexible options.
• 👶 Child tax benefits count toward your application.
• 💳 Debt assessment varies widely among lenders.
• 🏠 Rental income strategies can boost your buying power.

Takeaway: A solid mortgage strategy starts with awareness. Each lender has unique qualifications, so exploring your options and understanding these common pitfalls can make all the difference in your home-buying journey.

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