Introduction To Mortgages

Types of Mortgages

A Mortgage is an interest in property

Conventional Mortgages provided by the borrower as security for a loan

The borrower (mortgagor) receives funds

The lender (mortgagee) has an interest in the property until the loan is repaid.

High Ratio Mortgage Insurance

When a mortgage exceeds 75% of the sale price of a property, the borrower is required to obtain insurance which protects the lender. This insurance is provided by Canada Mortgage and Housing Corporation.

The insurance premium is calculated on a sliding scale based on the amount of mortgage.

Financing Your Property

There are many common methods of financing the purchase of a property, including:

Cash

Cash to existing mortgage

New mortgage financing - conventional or high ratio

Whenever a High Ratio mortgage is involved in the Financing Process, several steps are required:

Completion of the loan application by the lender (an application fee may be required)

The lender processes and reviews the application based on information provided by the borrower

The lending institutions require:

1. An appraisal of the home

2. A Credit Report on the borrower

3. Verification of net worth (assets & liabilities) of the borrower

4. Verification of down payment

5. Verification of income of the borrower

6. Once the loan is approved, a Mortgage Commitment is issued for the borrower's signature

7. On closing, the lender disburses funds to the Seller's solicitors

8. The loan documents will be registered on title by the Buyer's solicitor.

Determining Your Affordable Price Range

The price of property that a buyer can afford depends on:

Affordable Down payment

Mortgage payments supportable by the borrower's income

Summary of Buyer Closing Costs

There may be other costs associated with purchasing property. This is a general guide only.

1. Home Inspection: If desired, approximate cost $300.00

2. Legal Fees: Legal fees vary according to the lawyer. Make sure you ask what the fee includes. Approximately $300 - $800.00 (plus disbursements).

3. Disbursements: There will be other costs which the lawyer will have to pay on your behalf, i.e. registration fees, photocopies, etc. Approximately $100.00 - $300.00.

4. Statement of Adjustments: Purchaser and Seller are each responsible for their share of taxes and utilities.

5. Home Insurance: Home insurance varies from one insurance company to another. We would be happy to have one our Toole Peet insurance agents assist you with competitive rates and benefits.

6. Mortgage Application: Processing fee-approximately $100.00.

7. Mortgage Appraisal: Approximately $200.00.

8. Real Property Report: (Survey Certificate)

If the Seller should not provide you with an acceptable RPR in the Real Estate Purchase Contract a new RPR will cost approximately $400.00.