Mortgages Aren’t One-Size-Fits-All
Lisa Manwaring • August 27, 2025
Why the Cheapest Mortgage Isn’t Always the Smartest Move
Some things are fine to buy on the cheap. Generic cereal? Sure. Basic airline seat? No problem. A car with roll-down windows? If it gets you where you're going, great.
But when it comes to choosing a mortgage? That’s not the time to cut corners.
A “no-frills” mortgage might sound appealing with its rock-bottom interest rate, but what’s stripped away to get you that rate can end up costing you far more in the long run. These mortgages often come with severe limitations—restrictions that could hit your wallet hard if life throws you a curveball.
Let’s break it down.
A typical no-frills mortgage might offer a slightly lower interest rate—maybe 0.10% to 0.20% less. That could save you a few hundred dollars over a few years. But that small upfront saving comes at the cost of flexibility:
- Breaking your mortgage early? Expect a massive penalty.
- Want to make extra payments? Often not allowed—or severely restricted.
- Need to move and take your mortgage with you? Not likely.
- Thinking about refinancing? Good luck doing that without a financial hit.
Most people don’t plan on breaking their mortgage early—but roughly two-thirds of Canadians do, often due to job changes, separations, relocations, or expanding families. That’s why flexibility matters.
So why do lenders even offer no-frills mortgages?
Because they know the stats. And they know many borrowers chase the lowest rate without asking what’s behind it. Some banks count on that. Their job is to maximize profits. Ours? To help you make an informed, strategic choice.
As independent mortgage professionals, we work for you—not a single lender. That means we can compare multiple products from various financial institutions to find the one that actually suits your goals and protects your long-term financial health.
Bottom line: Don’t let a shiny low rate distract you from what really matters. A mortgage should fit your life—not the other way around.
Have questions? Want to look at your options? I’d be happy to help. Let’s chat.
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A question that comes up from time to time when discussing mortgage financing is, “If I have collections showing on my credit bureau, will that impact my ability to get a mortgage?” The answer might have a broader implication than what you might think; let's spend a little time discussing it. Collections accounts are reported on your credit bureau when you have a debt that hasn’t been paid as agreed. Now, regardless of the reason for the collection; the collection is a result of delinquency, it’s an account you didn’t realize was in collections, or even if it’s a choice not to pay something because of moral reasons, all open collections will negatively impact your ability to secure new mortgage financing. Delinquency If you’re really late on paying on a loan, credit card, line of credit, or mortgage, and the lender has sent that account to collections, as they consider it a bad debt, this will certainly impact your ability to get new mortgage financing. Look at it this way, why would any lender want to extend new credit to you when you have a known history of not paying your existing debts as agreed? If you happen to be late on your payments and the collection agencies are calling, the best plan would be to deal with the issue head-on. Settle the debts as quickly as possible and work towards establishing your credit. Very few (if any) lenders will even consider your mortgage application with open collections showing on your credit report. If you’re unaware of bad debts It happens a lot more than you’d think; people applying for a mortgage are completely unaware that they have delinquent accounts on their credit report. A common reason for this is that collection agencies are hired simply because the lender can’t reach someone. Here’s an example. Let’s say you’re moving from one province to another for work, you pay the outstanding balance on your utility accounts, change your phone number, and make the move. And while you think you’ve paid the final amount owing, they read your meter, and there is $32 outstanding on your bill. As the utility company has no way of tracking you down, they send that amount to an agency that registers it on your credit report. You don't know any of this has happened and certainly would have paid the amount had you known it was due. Alternatively, with over 20% of credit reports containing some level of inaccuracy, mistakes happen. If you’ve had collections in the past, there’s a chance they might be reporting inaccurately, even if it's been paid out. So as far as your mortgage is concerned, it really doesn’t matter if the collection is a reporting error or a valid collection that you weren’t aware of. If it’s on your credit report, it’s your responsibility to prove it’s been remediated. Most lenders will accept documentation proving the account has been paid and won’t require those changes to reflect on your credit report before proceeding with a mortgage application. So how do you know if you’ve got mistakes on your credit report? Well, you can either access your credit reports on your own or talk with an independent mortgage advisor to put together a mortgage preapproval. The preapproval process will uncover any issues holding you back. If there are any collections on your bureau, you can implement a plan to fix the problem before applying for a mortgage. Moral Collections What if you have purposefully chosen not to pay a collection, fine, bill, or debt for moral reasons? Or what if that account is sitting as an unpaid collection on your credit report because you dispute the subject matter? Here are a few examples. A disputed phone or utility bill Unpaid alimony or child support Unpaid collections for traffic tickets Unpaid collections for COVID-19 fines The truth is, lenders don’t care what the collection is for; they just want to see that you’ve dealt with it. They will be reluctant to extend new mortgage financing while you have an active collection reporting on your bureau. So if you decide to take a moral stand on not paying a collection, please know that you run the risk of having that moral decision impact your ability to secure a mortgage in the future. If you have any questions about this or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you!
Can You Get a Mortgage If You Have Collections on Your Credit Report? Short answer? Not easily. Long answer? It depends—and it’s more common (and fixable) than you might think. When it comes to applying for a mortgage, your credit report tells lenders a story. Collections—debts that have been passed to a collection agency because they weren’t paid on time—are big red flags in that story. Regardless of how or why they got there, open collections are going to hurt your chances of getting approved. Let’s break this down. What Exactly Is a Collection? A collection appears on your credit report when a bill goes unpaid for long enough that the lender decides to stop chasing you—and hires a collection agency to do it instead. It doesn’t matter whether it was an unpaid phone bill, a forgotten credit card, or a disputed fine: to a lender, it signals risk. And lenders don’t like risk. Why It Matters to Mortgage Lenders? Lenders use your credit report to gauge how trustworthy you are with borrowed money. If they see you haven’t paid a past debt, especially recently, it suggests you might do the same with a new mortgage—and that’s enough to get your application denied. Even small collections can cause problems. A $32 unpaid utility bill might seem insignificant to you, but to a lender, it’s a red flag waving loudly. But What If I Didn’t Know About the Collection? It happens all the time. You move provinces and miss a final utility charge. Your cell provider sends a bill to an old address. Or maybe the collection is showing in error—credit reports aren’t perfect, and mistakes do happen. Regardless of the reason, the responsibility to resolve it still falls on you. Even if it’s an honest oversight or an error, lenders will expect you to clear it up or prove it’s been paid. And What If I Chose Not to Pay It? Some people intentionally leave certain collections unpaid—maybe they disagree with a charge, or feel a fine is unfair. Here are a few common “moral stand” collections: Disputed phone bills COVID-related fines Traffic tickets Unpaid spousal or child support While you might feel justified, lenders don’t take sides. They’re not interested in why a collection exists—only that it hasn’t been dealt with. And if it’s still active, that could be enough to derail your mortgage application. How Can You Find Out What’s On Your Report? Easy. You can check it yourself through services like Equifax or TransUnion, or you can work with a mortgage advisor to go through a full pre-approval. A pre-approval will quickly uncover any credit issues, including collections—giving you a chance to fix them before you apply for a mortgage. What To Do If You Have Collections Verify: Make sure the collection is accurate. Pay or Dispute: Settle the debt or begin a dispute process if it’s an error. Get Proof: Even if your credit report hasn’t updated yet, documentation showing the debt is paid can be enough for some lenders. Work With a Pro: A mortgage advisor can help you build a strategy and connect you with lenders who offer flexible solutions. Collections are common, but they can absolutely block your path to mortgage financing. Whether you knew about them or not, the best approach is to take action early. If you’d like to find out where you stand—or need help navigating your credit report—I’d be happy to help. Let’s make sure your next mortgage application has the best possible chance of approval.
