Top 5 Mortgage Mistakes First-Time Buyers Make in 2027

By Jatin Dua · Broker of Record, RE/MAX Quantum Realty · Updated 2 November 2026 · 9 min read — The five mortgage mistakes first-time GTA buyers make in 2027, with the rules behind each and worked numbers on stress tests, CMHC premiums and penalties.

This is for first-time buyers in Toronto and the GTA who are getting a mortgage in 2027. You get the five mortgage mistakes I see most often, the actual rules behind each one, and worked numbers so you can check your own plan before you make an offer.

What has changed for first-time buyers’ mortgages going into 2027?

Rates turned. On 28 October 2026 the Bank of Canada raised its policy rate by 0.25 points to 2.50%, its first increase in more than three years. The big banks raised their prime rate from 4.45% to 4.70%, effective 29 October. The Bank said inflation, pushed up by high energy prices, is expected to stay around 3% through much of 2027 before returning close to 2% by the middle of 2028.

Some rules work in your favour. Since 15 December 2024, the federal government has allowed 30-year amortizations on insured mortgages for all first-time buyers and buyers of new builds, and raised the maximum price for an insured mortgage from $1 million to $1.5 million.

Those changes make a few old mistakes more expensive. Here are the five that matter most.

1. Treating a pre-approval as a final approval

A pre-approval tells you the most a lender might lend and can lock in a rate. It is not a promise. The Financial Consumer Agency of Canada (FCAC) says plainly that pre-approval does not guarantee you will be approved for a mortgage.

Before final approval, the lender checks the actual property against its standards, and the amount it lends depends on the property’s value and your down payment. FCAC notes a lender can still refuse after pre-approval, or offer a smaller loan, a higher rate, a larger down payment requirement or ask for a co-signer.

Where buyers go wrong

• Firming up without a financing condition on a home the lender has not reviewed.
• Changing their finances before closing: a new car loan, a new credit card, a job change or a missed payment can change the answer.
• Letting the rate hold lapse. FCAC says lenders may hold a rate for 60 to 130 days, depending on the lender. Ask how long yours lasts and whether you get a lower rate if rates fall.

I explain what a pre-approval does and does not cover in what a mortgage pre-approval guarantees in Ontario.

2. Borrowing the maximum the stress test allows

You do not qualify at the rate you will pay. For uninsured mortgages, OSFI requires federally regulated lenders to test you at the higher of 5.25% or your contract rate plus 2 points. Insured mortgages face a similar federal test.

Lenders then check two ratios. CMHC limits gross debt service (GDS) to 39% of gross income and total debt service (TDS) to 44%. GDS counts principal and interest, property tax, heat and half of any condo fee. TDS adds your other debts, such as car loans and credit lines. For unsecured credit lines and credit cards, CMHC uses at least 3% of the outstanding balance as the monthly payment, so a $10,000 card balance counts as at least $300 a month even if you pay less. Paying down cards before you apply can raise what you qualify for.

A worked example

A household earns $130,000 a year, expects $500 a month for property tax and heat, and has a contract rate of 4.5%, so it qualifies at 6.5%.

Source: my calculation using CMHC’s 39% GDS and 44% TDS limits and OSFI’s qualifying rule, with Canadian semi-annual compounding. Illustration only; lenders’ methods and inputs vary.

At 4.5%, the payment on $556,000 over 25 years is about $3,077 a month. That leaves no room in the ratios for daycare, savings or a second car. The maximum is a ceiling, not a target. Read my guide to the mortgage stress test for more examples.

3. Getting the down payment and insurance math wrong

In Canada the minimum down payment is 5% of the first $500,000 and 10% of the part from $500,000 to $1.5 million. At $1.5 million and above, you need 20%. With less than 20% down, you pay mortgage default insurance, and the premium depends on how much you borrow.

Source: CMHC premium rates (share of the loan) and Government of Ontario retail sales tax of 8% on taxable insurance premiums. My calculation for a 25-year amortization. A 30-year amortization adds 0.20% to the premium.

Two mistakes show up here. First, buyers forget that CMHC says provincial sales tax on the premium cannot be added to the loan, so it is cash at closing. Second, buyers put every dollar into the down payment and run short for land transfer tax, legal fees and moving. My guide to CMHC insurance costs in Ontario has the full premium table.

4. Choosing the lowest rate and ignoring the penalty

Most first-time buyers choose a closed mortgage, and FCAC says breaking a closed mortgage normally costs a prepayment penalty that can run to thousands of dollars. Life changes in five years: a new job, a baby, a move. If you sell or refinance early, the penalty can wipe out what you saved on rate.

FCAC explains that the penalty is usually the higher of three months’ interest or the interest rate differential (IRD). Lenders calculate the IRD in different ways, for example using posted rates or your discounted rate. In FCAC’s own example, a $200,000 balance at 6% with 36 months left has three months’ interest of about $3,000, but an IRD of about $12,000.

Questions to ask before you sign

• How is the IRD calculated, and which rates do you use?
• What are my prepayment privileges each year, as a lump sum or higher payments?
• Can I port the mortgage to a new home, or blend and extend?
• Are there admin, appraisal, reinvestment or discharge fees, or a cash-back clawback?

I go through real IRD examples in how lenders calculate mortgage penalties.

5. Picking fixed or variable without a plan for higher rates

Variable-rate mortgages and lines of credit priced off prime moved up 0.25 points after the October hike. By my estimate, that adds roughly $84 a month on a $600,000 variable mortgage over 25 years. Fixed rates follow bond yields rather than the Bank of Canada’s rate directly, and yields rose through September and October 2026.

Where rates go next is uncertain. The Bank said a further increase could be needed and that it will decide one meeting at a time, with the next decision on 9 December 2026. As of 28 October, markets priced about a 43% chance of another December hike, and RBC expected three more increases in total. Those are forecasts, not facts.

The mistake is not choosing fixed or variable. It is choosing without testing the bad case. Before you pick, ask:

• Could I afford the payment if my rate were 1 point higher?
• Does my variable mortgage change the payment, or extend the amortization when rates rise?
• How long do I plan to stay? A shorter stay makes penalties matter more.

My comparison of fixed or variable mortgages lays out both cases.

How much cash do first-time buyers need besides the down payment?

More than most expect, and a mortgage cannot cover it. FCAC’s pre-approval guidance asks buyers to show they can pay the down payment and closing costs, and to budget for moving and maintenance too. On a GTA purchase, the main extra items are:

• Land transfer tax: Ontario’s first-time buyer refund is up to $4,000. Inside the City of Toronto you also pay the municipal land transfer tax, which has its own first-time buyer rebate, so a Toronto purchase needs more cash than the same price in Mississauga or Vaughan.
• Sales tax on the insurance premium: 8%, in cash, as shown in the table above.
• Legal fees, title insurance and adjustments for prepaid property tax or condo fees.
• Moving, basic furniture and a cash cushion for the first repairs.

Ask your lawyer for an estimate of closing funds early, not the week before closing.

What to do next

1. Get a written pre-approval and note the rate hold end date.
2. Work out your payment at your rate plus 1 point and at the stress test rate.
3. Price your down payment, insurance premium and the 8% cash tax for your target price.
4. Ask each lender how it calculates the penalty, and compare prepayment and porting terms.
5. Run your numbers through the affordability calculator on this page before you start viewing homes.

Frequently asked questions

Sources

• Bank of Canada – Policy rate announcement, 28 October 2026
• Department of Finance Canada – Mortgage reforms (30-year amortizations, $1.5 million cap)
• FCAC – Getting preapproved for a mortgage
• OSFI – Minimum qualifying rate for uninsured mortgages
• CMHC – Calculating GDS / TDS
• CMHC – Mortgage loan insurance cost
• Government of Ontario – Retail sales tax: insurance and benefits plans
• FCAC – Mortgage fees: prepayment penalties

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