MORTGAGE FINANCING MATTERS
It is the PURCHASER’S responsibility to arrange any mortgage financing which might be required to complete the purchase or refinancing of your property. Once the mortgage is arranged, it will be the purchaser’s responsibility to:
1) satisfy any special requirements by the lender in order to avoid last minute financing problems on the closing day. Requirements may include:
- providing proof of income
- providing proof of down payment
- payment of other debt obligations
- order a condo status certificate if the property purchased/refinanced is a condo
2) confirm with the mortgage lender that mortgage instructions have been sent to our law office so that we can finalize processing the mortgage financing and obtaining mortgage funds for closing.
It is highly recommended that if a buyer chooses to seek pre-approval (before a property is purchased), such pre-approval should be in writing from the actual mortgage lender and not simply from a mortgage broker, confirming the terms of pre-approval and the mortgage.
Mortgage lenders must pre-approve (in writing) any Power of Attorney document being used if a mortgage is required to complete a transaction. Typically, to be approved, the borrower must be an existing customer of the bank OR must have signed the Power of Attorney document while in Ontario with witnessing done by an Ontario Lawyer. A Power of Attorney cannot be used to apply for a mortgage, which must be done in person.
It is highly recommended that if financing is required (whether it has been pre-approved or not), any Agreement of Purchase and Sale should be conditional upon written confirmation of financing terms, as well as an appraisal by an institutional lender (not merely a mortgage broker).
Open mortgages can usually be paid off at any time without a penalty. Closed mortgages cannot be paid off before the end of the mortgage maturity date without being subject to a penalty.
Institutional lenders usually offer accelerated payment options in the form of weekly or biweekly payment plans. This can reduce the duration of the mortgage by paying more towards the principal and thereby reducing the total interest cost.
Please be aware that if a purchaser is arranging an insured mortgage (where the cash down payment is less than 20% of the purchase price), the mortgage lender will deduct certain costs from the mortgage advance on closing. It is wise to check with your mortgage loan officer/broker for such costs beforehand so there are no later surprises!