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Red Flags in a Mortgage Offer

What should alert you in a mortgage offer's terms

Decision buy3 min readFebruary 11, 2026
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Certain elements in a Quebec mortgage offer should trigger your vigilance. A rate significantly below market often hides restrictive conditions. An IRD calculation based on posted rates (common among OSFI lenders) inflates future penalties. Prepayment privileges limited to 10% or less restrict your flexibility. Absence of portability traps you if you need to move. High discharge fees ($1,000+) increase total cost. A bona fide sale clause prevents refinancing. An AMF-certified broker identifies these red flags and protects you per the LDPSF. An AMF-certified mortgage broker in Quebec analyzes your situation free of charge and compares offers from multiple lenders to get you the best available conditions. The LDPSF requires them to act in your best interest, ensuring professional and objective advice to optimize your mortgage.

Warning Signs in a Mortgage Offer

Not all mortgage offers are equal. Here are elements that should alert you.

  • Suspicious rate: significantly below market = hidden restrictive conditions
  • Posted rate IRD: inflates your future break penalties (vs contractual rate)
  • Limited prepayment: 10% or less restricts your accelerated repayment capacity
  • No portability: traps you if you need to move before maturity
  • High discharge fees: $1,000+ instead of the standard $250-$400
  • Bona fide sale clause: prohibits refinancing, requires actual sale
  • Restrictive conversion: no variable-to-fixed option or unfavorable conditions
  • Transfer penalty: hidden fees for leaving the lender even at maturity

An AMF-certified broker compares conditions from all lenders and identifies these traps for you.

The Quebec Real Estate Market for Buyers

Homeownership in Quebec fits within a specific regulatory and fiscal framework. OSFI's B-20 stress test reduces borrowing capacity by 15 to 20% compared to the theoretical amount at the contractual rate. Mortgage loan insurance (CMHC, Sagen, or Canada Guaranty) is mandatory for any down payment below 20%, adding 2.8 to 4% to the borrowed amount. Transfer duties (welcome tax) in Quebec follow a progressive scale from 0.5% to 2.5% depending on price brackets. The Home Buyers' Plan (HBP) allows withdrawing up to $60,000 per person from your RRSP tax-free, and the First Home Savings Account (FHSA) offers up to $40,000 in deductible contributions with tax-free withdrawals for purchase.

Your Purchase Action Plan

Purchasing a property in Quebec is a project that requires methodical preparation. Start by establishing a realistic budget that goes beyond the bank calculator. Include all costs: down payment, closing costs (3-5% of price), transfer duties, notary ($1,000-$2,500), inspection ($500-$800), and tax adjustments. Plan an emergency reserve of 3 to 6 months of payments. Consult an AMF-certified broker for mortgage pre-approval and a 120-day rate hold. Work with an OACIQ-certified real estate broker for the search and negotiation. Draft a purchase offer conditional on inspection and financing to protect your interests.

Protecting Your Real Estate Investment

Buying a property is the most important financial project of your life. In Quebec, you benefit from a solid regulatory framework with the AMF overseeing mortgage brokers, the OACIQ overseeing real estate brokers, and the notarial process securing the transaction. An AMF-certified mortgage broker accompanies you free of charge from start to finish, from pre-approval to disbursement. They compare offers from multiple lenders, negotiate the best conditions, and ensure you understand every aspect of your mortgage commitment. Never make the most important financial decision of your life without professional consultation.

Frequently Asked Questions

Is a very low rate always good?
Not necessarily. Restrictive conditions (posted IRD, no portability, limited prepayment) can cost more long-term.
What is a bona fide sale clause?
It requires an actual sale of the property to terminate the mortgage. No refinancing possible before maturity.
Is the IRD calculation standardized?
No. Some lenders use contractual rate, others posted rate. The difference can be $5,000-$15,000 in penalties.
How to identify these red flags?
An AMF-certified broker knows each lender's conditions and identifies traps before you sign.

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Educational information only. This does not constitute financial advice under the Act Respecting the Distribution of Financial Products and Services (LDPSF). Consult an AMF-certified mortgage broker before making any financial decision.

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Educational info · Not financial advice