Everyone loves a bargain… whether it’s a half-price designer coat or a loyalty-point haul at the grocery store, that dopamine hit of “saving money” is real. But when it comes to your mortgage, hunting for the lowest number on a screen can seem like the right move. After all, the lower the rate, the more you save, right? This sounds good in theory, but choosing a mortgage based on rate alone can be an expensive mistake. There is a lot more to a mortgage than just the rate.
We just came off the July 15, 2026, Bank of Canada announcement, where Governor Macklem decided to hold the line at 2.25% for the sixth time in a row. While a “hold” might feel like a breather, the market is anything but calm. Between global tensions, new tariff threats, and overall economic volatility, the “cheapest” rate is often a wolf in sheep’s clothing.
Are you inadvertently sabotaging your financial future while trying to save a few bucks? Let’s look at seven common mistakes that homeowners make when shopping for a new mortgage.
1. Jumping on the Lowest Mortgage Rate Overall
We all want the lowest mortgage rate on the market. But some become so overly obsessed with finding the lowest rate believing that they are getting the best deal. But the best deal can be a costly trap if you place too much importance on the rate itself. I’m not saying that rate isn’t important. It is. It’s one of the most important things to consider. But the lowest rate is not always the best choice, nor is it the one that keeps the most money in your pocket at the end of the day. I’ve even had clients tell me that they don’t care about the term length, or even whether it’s fixed or variable. They just want the lowest rate. Period. It’s this mentality that can lead to a much more costly mortgage over the term.
Rate is not the most important thing. It’s the overall cost of the mortgage over the term. What can seem like a good deal can lead to additional cost and headache if the mortgage doesn’t suit your needs.
I’ve seen some make decisions that I know will come back to bite them. They tell us they were presented with an offer that they want to jump on. If it’s a good offer that suits their needs, then we’ll be the first to advise them to take it.
But there are also times where we know it’s the wrong choice. It may be something that doesn’t align with their goals… or may even prevent them from accomplishing them. At PMT, we’re always going to give you the same advice we would give to our own family. We’re about building clients for life and not just for a single mortgage transaction. We’re regularly advising people to choose an option that is contrary to our own best interests if we think that’s what’s best for them. But if a product offering doesn’t suit their needs based on the information they provided to us, we’ll advise them of that as well. We don’t need to get your business each and every time. What’s more important to us is your trust, and your knowing that you can count on us to give you the right advice… even if it means losing your business this time around. We know you’ll then refer your friends and come back to us for your future mortgage needs.
2. Ignoring the Penalty Math
Most Canadians focus on the interest they pay during the term, but they completely ignore what happens if they need to break their mortgage contract early. Statistically, about 60% of people break their 5-year fixed mortgage by year three. Many of them were convinced that the mortgage would have suited their needs for the full five years. But circumstances can and do change.
With variable rate mortgages, the penalty to break them early is almost always three months of interest. This can be calculated using the actual mortgage rate, or the prime rate, which is usually higher. But either way, the penalty is predictable with variable rate mortgages.
The penalty on fixed rate mortgages is most commonly the higher of three months of interest or the interest rate differential. Virtually all mortgage lenders, banks, monoline lenders, credit unions, life insurance companies, etc, use similar wording. If you ask your mortgage professional how the penalty is calculated, this is usually the answer… the higher of three months interest or the IRD. But what they don’t tell you is how that IRD is calculated. And quite honestly, most likely don’t even know.
The truth is that there are multiple ways to calculate the IRD penalty, which can lead to radically different results. There are harsher penalty lenders and fair penalty lenders. You could be facing a break penalty of up to 900% higher with a harsher penalty lender vs a fair penalty lender. This could mean the difference between a penalty of $5,000 or $45,000. Keep in mind that the difference is usually nowhere near this extreme. But it can be. We’ve seen it many times.
Most people don’t expect to break their mortgage contract… but so many people do, usually due to unforeseen circumstances. This could be due to illness, divorce, disability, loss of employment, etc.
For more information on how penalties are calculated, check out my blog on Mortgage Penalties Explained.
3. Waiting for the ‘Perfect’ Bottom
“I’ll just wait until rates drop further before locking in” Sound familiar? It’s a classic move. But trying to time the mortgage market is like trying to catch a falling knife, you’re more likely to get cut than to grab it perfectly.
If you wait for that “perfect” bottom and the market shifts, perhaps due to the ongoing global volatility, you might find that the rate you were “waiting for” has vanished, replaced by something higher. We see this time and time again. If we think there is time to wait, we’ll advise you accordingly. But there are also many times when we advise people that rates are in danger of increasing… but they still choose to shop around for something lower without locking in the rate. Once they realize they won’t find something lower, they come back to us wanting to lock in. But by that time, it’s too late. Rates have increased.
Locking in a rate doesn’t mean you’re committed to it. We’re always monitoring the market for our clients as part of our commitment to getting them the lowest rates possible. If another lender comes out with a lower rate, we can always move you to that lender. If the lender we have you approved with comes out with a lower rate promotion, we can generally get your rate lowered accordingly… even if you have already signed the mortgage approval documents.
If rates rise, then you’re protected. Locking in a rate early doesn’t mean that you’re committed to it. But it does eliminate the chance of having to settle for a higher rate should the market shift.
4. The ‘Convenience Tax’
This is the one that really gets me. You’ve been with the same big bank for 15 years. You have your chequing account there, your credit card, maybe even your kid’s RESP. When your renewal notice comes in the mail, it’s so easy to just sign it and send it back. We all get busy, and signing the bank’s renewal document is definitely the path of least resistance. But it can be an expensive move.
Banks count on your inertia. They may or may not offer “decent” rates to their loyal customers. By not shopping around, you are essentially paying a “convenience tax” to a multi-billion dollar institution that already has enough of your money. They treat your mortgage like a business transaction, because that’s exactly what it is to them.
Always take the time to check with us before signing the renewal offer from your bank. If their offers are competitive, then we’ll advise you to take the offer. But it’s possible that you could be passing up on much lower rates.
It’s also important for you to consider your needs moving forward. Most don’t give it a second thought and just choose the option that they think they want.
5. Failing to Consider Your Goals
Some become so focused on securing the lowest mortgage rate on the market that they forget to even consider if it suits their needs.
- How long do you think the home will suit your needs?
- Do you plan on expanding your family or do you expect a change in relationship status?
- Are you considering renovations in the near future?
- What is most important to you… a lower rate or a lower payment?
- Do you plan on purchasing an investment property in the near future?
- Do you need, or think you may need to add a HELOC, either now or in the future?
The answers to these questions will play a key role in the mortgage products we suggest for our clients. If you’re planning on selling in a year, then you’ll want to avoid 5 year fixed terms… even if the rate is more attractive than the other options.
If you’re planning on having another child and you’re in a bachelor condo, then you’ll want to avoid longer, fixed terms.
If you’re considering renovations, then perhaps you’ll want to reduce the 35% down payment you were planning… just to get a lower rate. Or, you may want to choose an option that includes a HELOC (Home Equity Line of Credit).
If you plan on purchasing a rental property in the future, or prioritize cash flow, then you’ll want to look at options with a longer amortization… even if the rate is higher. This will reduce your payment which will boost your buying power on the new investment purchase.
Do you have a goal of paying your mortgage off as fast as possible? If so, then it’s important to choose a lender with flexible prepayment privileges. Most lenders offer full 20/20 prepayment privileges, meaning you can increase your payments by up to 20% and/or pay up to 20% of the original mortgage balance per year, over and above your scheduled payments. However, some lenders only allow a maximum annual lump sum payment of 10%. While this is more than what most people will use, there are some who need the flexibility to prepay larger amounts.
But there is one other crucial thing to consider that many overlook. That’s the frequency in which the lender allows you to make lump sum payments. Most lenders will allow you to make as many prepayments as you like, providing they don’t exceed the maximum annual limit. However, some limit you to making only a single lump sum payment per year. For example, let’s say your annual prepayment limit is $50,000. If you were to make a single lump sum payment of say $5,000, then you wouldn’t be able to make another prepayment without penalty until the following year. The $45,000 in unused prepayment privileges is lost and does not carry over to the following year. If you plan on aggressively prepaying your mortgage, then you’ll want to avoid lenders who limit you to a single lump sum prepayment per year… even if their rate is lower.
At PMT, we’ll take the time to discuss your specific situation with you and will then present you with your best options that allow you to meet your goals. It’s not just about getting the lowest rate. It’s about getting the lowest rate on a product that will position you for long term success and to maximize your savings over the entire life of your mortgage.
6. Believing That All Rates are Equal
Huh? If i’m offered 3.45% by two different lenders, would that not mean they are equal?
Not always. While the interest on fixed rate mortgages is always compounded semi-annually, regardless of lender, variable rates can have interest that is compounded either semi-annually or monthly. This could mean that the 3.45% you were offered by two different lenders could have two different payments… despite everything else appearing the same.
For example, let’s say you need a mortgage of $500,000. You receive a quote of 3.45% from two different lenders, both with an amortization of 25 years. The offers sound identical… and they would be if the interest is compounded with the same frequency. But if one option is compounded monthly and the other semi-annually, then you’ll have slightly different payments:
- Monthly compounding: $2,489.74 per month
- Semi-annual compounding: $2,483.18 per month.
While the mortgage balance, rate and amortization are equal, the difference in compounding results in a monthly payment difference of $6.56. Even though the rate is the same, the equivalent rate on the monthly compounded option is roughly 0.0253% higher. The exact difference in payment and equivalent rate will vary with the contract rate (the rate your initial payment is based on). The lower the rate, the smaller the difference. The higher the rate, the larger the difference.
You can read more about this in my blog on Why Variable Rate Mortgages Can Be Misleading
7. Choosing the Wrong Mortgage Professional
A mortgage is the single largest financial commitment most people will ever make.
So why do so many buyers leave it to chance?
There is a massive difference between mortgage advisors. Whether you walk into a major bank or work with an independent broker, many people in this industry act as little more than order takers. It honestly scares me to see how often borrowers receive surface-level advice on such a massive transaction… which may not even be accurate. While there are certainly dedicated, skilled professionals out there, finding them can feel like searching for a needle in a haystack.
To protect your financial interests, here are a few things to keep in mind when choosing who will handle your home financing:
- Look Beyond the Rate: Don’t choose an advisor based strictly on a headline interest rate. A rate means very little if it comes attached to restrictive terms or advice that doesn’t fit your long-term goals.
- Question the Recommendation: If an advisor recommends a specific mortgage product, ask why. Are they tailoring it to save you money over time, or are they pushing a product because of a bank sales quota, a higher commission, or an internal incentive? Sadly, many prioritize their own interests over the client’s.
- Dig Into Their Experience: Many banks treat the mortgage advisor role as an entry-level position. You could easily end up working with someone who has only been in the mortgage world for a week. On the flip side, even 25 years of experience doesn’t automatically equal deep expertise. Take a moment to look up their LinkedIn profile, ask how long they’ve been in the field, and gauge their confidence when answering your questions.
- Expect Real Communication: The process shouldn’t leave you in the dark. If an advisor takes days to return calls, seems hesitant, or constantly says they have to “get back to you” on simple questions, that unnecessary delay creates stress you don’t need… especially when closing dates are fast approaching.
At the end of the day, you deserve a true professional… someone who breaks down complex jargon into plain English, guides you through every stage, and puts unbiased, honest advice above everything else.
Whether you are buying a home, renewing, or refinancing, make sure you align with a team that treats your mortgage with the exact same care and integrity they would for their own family. That’s the foundation on which PMT Mortgage was built and one of the key reasons for our success.
In my Amazon #1 best selling book, Beat the Bank – How to Win the Mortgage Game in Canada, I have an entire chapter dedicated to choosing the right mortgage professional… including a list of questions to ask.
Frequently Asked Questions
Is the prime rate going to drop in late 2026?
While some people are crossing their fingers, the consensus among experts: including the big banks: is that we are in for a “prolonged hold.” Some, like Scotiabank, are even warning of potential hikes if inflation doesn’t behave. Don’t bank on a cut that might never come.
What is the difference between a restricted and a full-featured mortgage?
A restricted mortgage has low rates but high “exit costs” and limited flexibility (like no portability, or fully closed terms). A full-featured mortgage allows you to move your mortgage to a new home, increase your payments, and generally offers fairer penalty structures.
Should I choose a fixed or variable rate right now?
It depends on your “sleep at night” factor. Variable rates are currently lower than they were a few years ago, but fixed rates offer protection against the global volatility we’re seeing. We can help you run the math on both scenarios based on your specific risk tolerance.
Why shouldn’t I just renew with my current bank?
Because they are likely not offering you their best possible deal. A mortgage broker has access to dozens of lenders, including ones you’ve never heard of, who are hungry for your business and willing to beat the big banks on both rate and terms.
Does it matter if my interest is compounded monthly or semi-annually?
Yes… especially with variable-rate mortgages. Even if two lenders offer the exact same rate, monthly compounding can produce a slightly higher effective borrowing cost and payment than semi-annual compounding. It’s a small detail that can quietly cost you more over time.
How do I know if my mortgage advisor is truly looking out for me?
Ask them to explain why they are recommending a product, what the penalty would look like if your plans change, and whether they considered your long-term goals… not just the headline rate. A good advisor should be able to explain the trade-offs clearly, without dodging the tough questions.
Final Thoughts
Hunting for the “cheapest” mortgage rate is like looking for the cheapest parachute: it might look fine on the ground, but you’ll really regret the choice halfway down. There is so much more to a mortgage than just rate. Choosing based on rate alone could end up costing you more money down the road. Either through higher penalties, restrictive terms, or simply by going with a product that prevents you from achieving your long term financial goals.
At PMT Mortgage, we believe in a “WOW experience” that goes beyond just a number on a page. Yes, we’re serious about getting you the lowest rate on the market. But that low rate will also come with high level advice and guidance. We treat you like family, providing the honest, unbiased advice you need on your mortgage. At PMT, we’re very particular about who we accept onto our team. All PMT team members are highly trained mortgage professionals and follow my very specific system designed to provide you with the best mortgage experience possible.
Whether you’re purchasing a new property, refinancing an existing mortgage, or facing a mortgage renewal, reach out to us today and let’s put together a strategy that will position you for long term success with your mortgage.
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