Five things I wish all home-buyers knew about mortgages
Most home purchases are done with the help of a mortgage. Here are some things I wish all home-buyers knew when purchasing:
1. An unconditional purchase agreement should not be signed without first obtaining a mortgage commitment from a lender. In writing. If the mortgage is not yet confirmed, make the agreement conditional on lending.
2. In most cases, the lender will ask the lawyer representing the home-buyer/ borrower to represent the lender, too. The home-buyer will need to consent to this conflict in representation (note: one of the few exceptions to the conflict rule by the Law Society of Ontario) and will be responsible for the fees of the lawyer's representation. The quote for legal fees usually includes the lender's representation. Check with the lawyer you are receiving a quote from to verify.
3. "Mortgage default insurance" is different from "mortgage protection insurance" which is different from "home/fire insurance" which is different from "title insurance." I can do a separate blog on the distinction but for now, a simple google search of the terms may do. A home-buyer/borrower should consult the lawyer retained to ensure the distinction is clear.
4. If the lender uses a lending intermediary, like Lender Lawyer Connect (LLC), the fee applicable to this service will be relayed to the borrower ($350ish).
5. While title insurance is not mandatory with a home purchase, when borrowing to purchase a home, a lender will impose a condition of lending that title insurance be purchased. See information about title insurance here: https://www.titleplus.ca/files/HBbrochure012018.pdf The cost of title insurance varies and is usually in the $180-300 range. The home buyer usually gets to pick the insurer (some names are TitlePLUS, Chicago, First Canadian Title, Stewart) so it is a very good idea for the home-buyer to do their research of the companies before buying. Note that some lenders may only accept policies from certain insurers.
6. Broker conditions are different from the conditions the lender wants the lawyer to meet. Broker or in-house bank mortgage advisor conditions (ex. proof of income, IDs, tax returns, etc.) must be met before the lender provides the lawyer with a "Solicitor Instructions" package. This package will include additional conditions that the client will need to meet with the lawyer. This is why a lawyer will ask the home-buyer to ensure all broker/advisor conditions be met as soon as possible and will require a minimum of five days since receiving the "Solicitor instructions" to complete the work required.
7. The home-buyer may feel like information requested by or documents signed with the lawyer are redundant - partly because it was already requested by the broker or in-house bank advisor. The apparent redundancy may actually be requests for more detail or amendments to documents. So, there may actually be differences in the documents requested or signed. The reality is that there may be actual redundancy and this is, at least in part, due to a type of "inter-rater reliability" measure the lender is using to complete their due diligence.
8. Most lenders require that all documentation required from the lawyer be submitted at least three business days before closing or else funding may be delayed. Delay of funding may mean breach of contract for the home-buyer/borrower with respect to the agreement signed with the vendor ( = potential litigation) so it is imperative that the documents be provided and signed in a timely manner.