SUMMARY OF YOUR MORTGAGE DOCUMENTS
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The following is a summary of your mortgage documents:
The Mortgage Approval or Commitment is prepared by your lender and contains the terms and conditions under which they may advance mortgage funds to you. Prior to the advancement of funds, some lenders are required to disclose to you
Some lenders will require you to sign these documents at their office and others will require you to sign these documents at the notary’s office. In any event, Patricia D. Wright will review these documents with you to ensure you are familiar with the terms contained therein.
MORTGAGE The Mortgage is the contract signed by you that gives your lender security in your home. This document must be notarized and will be executed by you at the offices of Patricia D. Wright. Based on this security, which is registered at the Land Title Office by the agents of Patricia D. Wright, the lender advances the mortgage funds which are used to purchase your home to the trust account of Patricia D. Wright, Notary Public. The mortgage contains your obligations to your lender, such as making mortgage payments on time and describes what the lender can do to you and your property if you breach any of the terms of your mortgage. The mortgage may also contain prepayment options that allow you to increase your mortgage payments. The mortgage is prepared by the offices of Patricia D. Wright from the conditions contained in the Mortgage Approval or Commitment Document prepared by your lender which both you and the lender have agreed on.
THE FOLLOWING IS A SUMMARY OF COMMON MORTGAGE TERMS: An OPEN MORTGAGE allows you to repay all or part of the total amount of your mortgage at any time without penalty. A CLOSED MORTGAGE usually has the lowest interest rate but lacks the flexible features of other mortgage options. Prepayment options are available but are subject to conditions and penalties and these will be discussed with you by Patricia D. Wright, Notary Public and your Lender. A PORTABLE MORTGAGE provides flexibility if you should move. You can transfer this mortgage to your new property without paying a mortgage penalty for early repayment. This option will be reviewed with you by Patricia D. Wright, Notary Public and your Lender. A CONVENTIONAL MORTGAGE allows you to borrow up to 75% of the purchase price or 75% of the value of the property, whichever is less. In order to have a Conventional Mortgage, you must pay 25% of the purchase price as a down payment. An INSURED OR HIGH RATIO MORTGAGE allows qualifying home buyers to borrow up to 95% of the purchase price or 95% of the value of the property, whichever is less. The down payment can be as low as 5% for qualifying home buyers. Your Lender or your Mortgage Broker can assist you further with information on this matter. The DOWN PAYMENT and cash required to close your purchase must come from your own resources and cannot be borrowed. In certain circumstances, the down payment can be paid to you by way of a gift, as long as your lending institution is fully aware of this and a proper gift letter is prepared and presented to your lender for their approval. You will be required to bring the balance of the down payment into the offices of Patricia D. Wright, Notary Public, by certified cheque or bank draft made payable to "Patricia D. Wright, in trust". AMORTIZATION is the period of time required to reduce your mortgage debt to zero when payments are made regularly. The TERM of your mortgage is the length of time you will be paying a specific interest rate on your mortgage loan. You may not have paid off your entire mortgage principal at the end of the term because your amortization period will likely be longer than the term. An EASEMENT or RIGHT OF WAY is a right acquired for access to or over another person’s lands for a specific purpose. A typical example is a utility easement or right of way that allows the utility company access to your property for the purpose set out in the agreement. Patricia D. Wright strongly recommends that you obtain a copy of these agreements if one is registered against your property. Lenders may retain money from your mortgage funds to cover future taxes, accrued interest or repairs that may be necessary. If there will be holdbacks, then these will be specified in your mortgage commitment letter. Make sure that you know what deductions your mortgage company will make upon advancing mortgage funds to Patricia D. Wright as your Notary. Does your mortgage contract allow for any prepayment options? The more money you can repay to your lender, the less interest you will pay. Know what your prepayment options are; if you are financially able to take advantage of these options, do so. Remember that on a renewal of your mortgage contract the prepayment options contained in your mortgage contract will not apply unless specifically referred to in your mortgage renewal agreement. Your Lender and Patricia D. Wright, Notary Public, would be happy to review these clauses in your mortgage with you. THE FOLLOWING IS A SUMMARY OF WHAT MOST MORTGAGE CONTAINS: For information purposes only! Patricia D. Wright will review your mortgage with you at the time of our meeting. In case of a conflict between this information summary and any specific mortgage contract, the terms of the mortgage contract will govern. Remember that the terms of your mortgage are subject to the interpretation of the Courts. The Mortgage Contract may be one of the most important documents you will ever sign. All mortgages in British Columbia contain the same basic elements. In the Mortgage you are agreeing to the following:
This document will be executed at the time you attend the offices of Patricia D. Wright, Notary Public. a) The Interest Adjustment Date of your mortgage is the commencement date of your mortgage. This date can change depending upon when your mortgage funds are advanced. If this date changes, your lender should be in contact with you advising of the revisions. b) The First Mortgage Payment is usually due one month after the Interest Adjustment Date. Unlike rent payments where you pay in advance, under a mortgage, you must have the use of the mortgage funds prior to your first mortgage payment. c) There is no automatic right of renewal under a mortgage. When your mortgage matures you must pay the balance owing unless the lender, at their option, grants you a renewal. Then you must decide if you wish to accept the terms of renewal or if you wish to transfer the mortgage to another lender who consents to accept you as a Mortgagor. d) The payment of taxes is your responsibility and taxes must always be in a current position. If your mortgage payments include principal, interest and taxes, your lender will pay the current year’s taxes if there are sufficient funds in your mortgage tax account. If not, then your lender can pay the taxes in full from the money in your tax account and from their funds, leaving your tax account in a deficit position. Alternatively, if there is an insufficient sum in your tax account to pay the taxes, your lender can request the difference from you and you are obligated to pay this amount immediately. The offices of Patricia D. Wright, Notary Public will ensure that the taxes are in a current position. e) Your lender, at their option, can grant you permission to pay your own taxes. Under this option you must pay the taxes before the due date and supply your lender with evidence of payment by way of receipted tax statement. At certain times of the year, this may also be done by way of the Statement of Adjustments at the offices of Patricia D. Wright, Notary Public. f) You are responsible for maintaining insurance coverage on your property with loss payable to your lender for the full term of the mortgage. If you miss a premium payment your lender, at their option, may place insurance coverage to satisfy their requirements but not yours. This extra cost may be added back to your mortgage debt resulting in your paying mortgage interest on this sum. The offices of Patricia D. Wright, Notary Public, will require written confirmation of your insurance coverage prior to your closing. g) Any improvements that you make to the mortgage security will be deemed to be subject to the mortgage debt. If you breach the terms of your mortgage contract and if your lender commences successful foreclosure action, you will forfeit the property being mortgaged and all your improvements. h) Every mortgage contains a clause stating that improvements to your mortgaged premises must first be cleared with your lender. Your lender does not want you to alter the structure they have appraised unless, in their opinion, the alteration will maintain the value of the property and comply with zoning by-laws. What you believe is an improvement may, in fact, reduce the value of your property. If you are contemplating an alteration that requires you to obtain a building permit, then you should first obtain your lender’s consent. Minor improvements such as carpeting, painting and the like should not require prior lender permission. i) All mortgages contain a clause that makes the advancement of mortgage funds at the discretion of your lender. If prior to the advancement of funds, your financial position changes and, in their opinion, your lender believes that you will be unable to make the mortgage payments, then your lender will not advance the funds. The lender does not have to be reasonable in deciding not to advance mortgage funds to you; however, if your financial position has not changed, there should be no problem. j) Most mortgage contracts will contain a "Sales Clause" that makes the mortgage assumable only if the proposed buyer qualifies. The position of your lender is that they had to qualify you for the mortgage and likewise they must qualify anyone who wishes to assume your mortgage. Without this clause the lender would have no control over their mortgagors. People who cannot make the mortgage payments could assume the mortgage and would immediately fall into arrears, necessitating foreclosure action at an additional cost to the lender. Should a shortfall occur in the foreclosure, the lender may still look to you to cover this shortfall. Patricia Wright will discuss this further with you at your meeting. k) Most mortgages contain prepayment options allowing the Mortgagor to increase their monthly mortgage payments and/or make payment directly on the principal amount owing without penalty. Some prepayments are subject to a penalty depending on the amount paid. As these options vary from one mortgage company to another, make sure you know what your options are and what prepayments you can make without penalty. These will again be reviewed with you at the offices of Patricia D. Wright, Notary Public. l) Most mortgage companies will allow you to make mortgage payments more frequently than once a month. Contact your mortgage company to ascertain if you have this option and what is required from you to exercise this option. Additional payments will greatly reduce the amount of interest you will be required to pay your lender. Your mortgage may be registered with a monthly payment amount but you may have a side agreement with the lender setting out your agreed upon payment method.
Fire Insurance Particulars Fire insurance coverage must be placed on your new home and be effective as of the completion date. Please verify that prior to completion, your fire insurance agent has forwarded to my office either a binding letter or a certified copy of your insurance policy confirming your fire insurance coverage. The office of Patricia D. Wright, Notary Public, will require the following information from your fire insurance agent to finalize your purchase:
h) How much can I borrow on my mortgage? To calculate the amount you can afford to borrow your lender and or your mortgage broker will calculate how much debt you can handle. The amount of debt you can assume is normally based on two ratios. Your percentage of debt to income will normally be within the following limits.
These are simply guidelines as different situations require different considerations. Again your lender and/or your mortgage broker can assist you in this regard. How much money as a down payment do I need? You need 25 percent down for a conventional mortgage. If you are unable to afford that, Canadian Mortgage and Housing Corporation (CMHC) and GE Insurance offer insured mortgages of up to 95 percent of the home’s value. That means you can purchase a home with as little as 5% down. However, there are certain qualifications that you have to meet and that your lender will discuss with you. If I can afford it, should I put more into the down payment? The more money you put down now, the more money you save by way of lesser interest and a shorter mortgage life.
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