Mortgage Broker Regulators' Council of Canada

Being a Responsible Borrower

Getting a mortgage is your decision. It is important to know how a mortgage will affect your finances and possibly your lifestyle. Understanding the risks will help you decide if it is the right choice for you. To begin, you need to know how much it will cost, if you can afford it and how it will affect you.

Will you be able to afford the mortgage?
Consider not just how much money you have today, but your financial position for the length of the mortgage. Ask yourself if you will be able to continue to make the full payments on time. Even if you can, consider how the payments will affect your spending money and your ability to deal with sudden or unexpected financial needs. Will you have difficulties making sure you have enough left for other things you need?

Do you have a good credit history?
Your credit history determines your credit worthiness and your ability to get a mortgage. Lenders will ask to check your credit history to decide if they want to offer you a mortgage. But be careful not to agree to too many credit checks over a prolonged period of time– that could have a negative effect on your credit score.

How stable is your income and employment?
This is especially important for seasonal and contract workers. A decrease in pay or losing your job could seriously change what you can afford and your ability to pay back the mortgage.

How much does owning a home cost?
Owning a home costs more than the amount of the mortgage. When you purchase a home, there are closing costs, including legal and other fees, along with appraisals and land transfer taxes to be paid. Once the home is yours, there are moving expenses, property taxes, insurance, condo fees, home repairs, and so on. Make sure to include all of these expenses as part of the total cost when you are considering if you can afford a mortgage.

Will owning a home affect your other financial and life decisions?
Mortgage payments could limit your ability to manage other expenses. After making your mortgage payments, would you have enough money to also pay for the things you might need in the years ahead? You might need a vehicle, wish to travel, have children or add to your family in the future. Consider if a mortgage could prevent you from being able to manage other commitments or goals.

What happens if you can't pay for the mortgage?
Not paying your mortgage on time and in full can lead to penalty fees, default and even foreclosure. That means, if you default, the lender has the right to take possession of the property to recover the money still owed on the mortgage. Depending on the circumstances, you may never get the home back and the lender may sell the home.

If this happens, all of the previous mortgage payments you have already made, all the money you have invested into the home and any equity (value beyond what is owed on the mortgage) in the home could be lost. If the lender sells the home for a price that is less than what was left on the mortgage when it went into default, you might even have to pay the difference. Also, it will be harder in the future to find a lender that will offer you another mortgage.

Will your property value increase or decrease?
A home is often a good asset. But not always. The value of a home can go up or down. Decreases in value can result in losses of equity.