7 IMPORTANT THINGS TO KNOW ABOUT MORTGAGES

1. Type and Term: Most common are Closed Mortgages ranging from 6 months to 5 years; a few lenders have terms up to 15 years. Typically, 6-month and 1-year mortgages can be “Open” or “Convertible”. A true open mortgage can be paid in full at any time without penalty, while with a true convertible mortgage this privilege may have no penalty.
2. Commitment Period: This period protects the interest rate in times of market instability. Sixty-day rate guarantees are most common. 120-day rate guarantees can be negotiated and this provides peace of mind when entering a long closing. Meanwhile, you will benefit from any rate drops in the interim. If your mortgage is up for renewal, the lender typically can set your new rate 30 days prior to the renewal date.
3. Pre-Payment Privileges: On the anniversary, one is typically allowed to make a lump sum payment of up to 10 or 15 percent of the original loan amount. Increasing your monthly or bi-weekly payments by the same percentage is also allowed. These extra payments directly reduce the principal outstanding and subsequently shortens the amortization period. Negotiating a 20 percent prepayment ability as well as the option to make this payment at any time, is not uncommon.
4. Weekly and Bi-Weekly Payments: For the most part, all lenders offer this. It is important though that one expresses a wish for accelerated payments. In effect, this will equal one extra monthly payment per year, and will reduce your amortization period from 25 years to 20 years. You will be mortgage free 5-years sooner!
5. Portability: This is very important for long-term mortgages. If your mortgage is not up for renewal, or open, you have the option to transfer it to another qualified property. This will allow you to avoid discharge penalties, which can otherwise be quite high.
6. Interest Adjustment Date (IAD): IAD is usually an unexpected expense for most new buyers. Usually mortgages commence on the first of the month; therefore, if you are closing in the middle of the month, unpaid interest is due from that date to the end of the month. This adjustment is deducted from the advance on closing day.
7. Mortgage Broker: A mortgage broker allows the borrower access to all mortgage products, and subsequently the best rates and privileges available … with no arranging fees for the qualified buyer.

RRSP FIRST TIMES HOME BUYERS PLAN

Available only to first time home buyers defined as those who have not owned a home and lived in it as a principal residence in any of the 5 preceding calendar years. Further:

• Individuals can only participate in the Plan once.
• Maximum withdrawal amount is $25,000.
• If your spouse is also eligible you can each withdraw $25,000 for a total of $50,000.
• The money you take out of your RRSP must have been deposited at least 90 days prior to the withdrawal.

Eligible Homes For This Plan:

• Any existing or new home located in Canada.
• Can be detached, semi-detached, townhouse, condominium, mobile home, or co-op.
• Must be occupied as principal residence within one year after buying or building the home.

Benefit:

• Allows you to purchase a home with money “borrowed” from your RRSP.
• There is no withholding tax on the withdrawn amount and no tax liability when you repay the money to your RRSP over a period of not more than 15 years.
• The repayment begins the second calendar year following the year in which the withdrawal is made.

Example:

• June 2015 withdraw $15,000 from RRSP to purchase a home.
• No repayment to RRSP in 2016.
• 2017 repayment is $1,000 ($15,000-15 years).
• Payment is due by December 31, 2017.
• If you repay only $700 in 2017 you must report the $300 shortfall as income for 2015.
• Year 2018 payment will be another $1,000.

*It is always advisable to check the above with your Lender. You may also review the CMHC Home Buyers Guide and other pertinent information found on www.cmhc.ca or ask us to email you a copy.

SUMMARY OF BUYERS CLOSING COSTS

Survey: If the seller should not provide you with an acceptable survey in the Agreement of Purchase and Sale, a new survey will cost approximately $2000. Title insurance is a good alternative.

Title Insurance (optional): Title insurance is a contract of insurance between the insured and the title insurance company. In return for payment of a one-time premium, the title insurance company agrees to defend the insured from future losses arising because of defects or events that occurred prior to the time the policy was issued (ie: a defect on title, an adverse claim or as an alternative to a survey). Cost is approximately $200 – $300. This will reduce the cost of closing disbursements substantially.

Land Transfer Tax: Payable on all purchases: see separate section “Resources: Land Transfer Tax Calculator”.

Legal Fees: Legal fees may vary according to the lawyer. Make sure you ask what the fee includes. There will be other costs the lawyer has to pay on your behalf.

Disbursements: There will be other costs which the lawyer will have to pay on your behalf, i.e. registration fees, photocopies, register transfer, register mortgage, building and zoning, sheriff’s certificate, tax certificate, utility certificates, etc. Up to $500; however, will be less with title insurance.

Statement of Adjustments: Buyer and Seller are each responsible for their share of taxes, fuel and utilities as of the date of completion of the Agreement of Purchase and Sale.

Home Insurance: Home insurance varies from one insurance company to another. Contact your broker for rates. Approximately $600 – $800 can be paid annually on an average 3-bedroom, single-family home.

Mortgage Appraisal: Approximately $250 – $500 (for conventional mortgages), depending on the Lender.

HST: Most residential re-sale homes are exempt from HST. However, most services involved with the transaction will be subject to HST, such as:

• Lawyer’s Fees
• Appraisals
• Processing Fees
• Home Inspections
• Insurance
• Moving Costs, etc.
• Real Estate Fee
• CMHC Premium

WHAT IS TITLE INSURANCE?

Title Insurance is an insured statement of the conditions of ownership of real estate at the time a policy is issued. For a low, one-time premium a title insurer will compensate you for loss or damage suffered as a result of defined title defects, survey problems or other such title matters.

Title Insurance Covers

• The policy amount (purchase price plus inflation coverage).
• ALL legal costs you would have to pay to defend your title for as long as you or your heirs hold an interest in the property.

Title Insurance Protects You Against

1. Fraud and Forgery:
   • Fraudulently discharged mortgages;
   • Forged documents; and
   • False impersonations.
2. Title Defects:
   • Unmarketability of title;
   • Errors or omissions on the public registry;
   • Unregistered easements (utility, pipeline, etc.);
   • Priority of other liens or encumbrances;
   • Executions or court judgments; and
   • Undisclosed or missing heirs.
3. Survey Problems:
   • Errors in existing surveys;
   • Encroachment(s) on a neighbouring property;
   • No legal access to the property (rights of way);
   • Municipal zoning and by-law infractions; and
   • Contravention of subdivision, development and other agreement.

Why Do You Need Title Insurance?

• Title insurance provides coverage where traditional methods do not. In theory, buyers and lenders have limited protection provided by the Torrens system of land registry (existing in most provinces) and a lawyer’s opinion letter.
• You may recover loss from a lawyer’s professional liability insurance funds and provincial land assurance funds; however, negligence must be proven (legal costs paid by you). Payouts by land title assurance funds are rare and many things like fraud, forgery, zoning and by-law infractions simply aren’t covered.

Other Benefits

Title insurers cover many of the things your lawyer would have had to spend time and money searching, possibly reducing your lawyer fees. Most financial institutions accept title insurance in place of an up-to-date residential survey.

When problems surface on closing, title insurers assume the risk, eliminating delays and perhaps even saving the deal.

Examples Of Problems Covered By Title Insurance

• A title problem – someone with your same name has a court judgment against them. The bank refuses to release funds even though you sign an affidavit confirming this person is not you.
• A survey problem- It is discovered that the garbage or pool of the house you are buying extends onto a neighbouring property, municipal setback or utility right of way. At any time, you can be ordered to remove this encroaching structure.

When you shift the risk to a title insurer, the deal can close – on time – so you can move in as scheduled, avoiding any additional costs and inconvenience.

• Title insurance insures against past problems that could affect your ownership in the future.
• Title insurance covers both you and your lender under the same insurance policy – at no additional cost.

OUR COMMITMENT TO YOU

From the preliminary stages to the happy day of possession and beyond, the team at Mulford & Co Real Estate is prepared to help you with one of the biggest and most important transactions of your life. Some of the ways we provide assistance to you include:

• Identify your needs, wants and abilities.
• Show you properties (on MLS and other) and provide supplementary information (eg: values, taxes, costs of utilities).
• Seek information regarding Municipal services, zoning, building permits, schools, churches.
• Investigate financing alternatives and insurance requirements.
• Assist you with loan application and processing.
• Help with advice on possible home/ property improvements.
• Provide samples of forms used in the transaction.
• Draft offers and negotiate counter offers.
• Communicate between you and the seller with offers.
• Review closing procedures and costs as well as monitor and track closing deadlines.
• Provide information on services to complement your purchase (legal, appraisal, home inspection service, landscaping, accounting, movers).
• And much more….