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  • Switching mortgage lenders: What you need to know.

    Switching mortgage lenders: What you need to know.

    With interest rates on the rise, switching mortgage lenders, or changing your mortgage from a variable rate to a fixed rate may have crossed your mind as an option to avoid an increasing mortgage payment or perhaps take advantage of a better rate than your current rate.The good news is that switching mortgage lenders is almost always possible.  The downside is that it comes at a cost that sometimes may outweigh the benefits of making the switch.The costs of switching a mortgage can be substantially lower if you switch mortgage lenders when your current mortgage term is up for renewal, so to avoid, or minimize penalties from your current mortgage lender.It is also important to start the switching process at least 2-3 months prior to your current term expiring as it takes time to process your application and coordinate the switching of your mortgage.

    What are typical costs to switching mortgage lenders?

    There are several fees when it comes to switching lenders. In some cases, your new lender will cover these costs to get your business but always confirm up-front, just to be sure.Costs can include:
    • Setup fees with the new lender, which may include discharge, registration, transfer or assignment fees from your current lender
    • An appraisal fee to confirm the value of your property may apply in some circumstances
    • Other administration fees may exist depending on the lender and the province you reside in
    • Legal and registration fees
    • Penalties from your current mortgage lender (if you are not switching at the expiry of your current term).
    A mortgage renewal can sound and feel overwhelming. For this reason, there are several essential things to keep in mind to help ensure your mortgage renewal runs smoothly.First, try to avoid any of the following to keep all your options open:
    • Leaving your renewal to the last minute
    • Signing a renewal letter with your current lender without looking at other options

    When and how to shop around before mortgage renewal

    Many savvy Canadians take this opportunity to shop around for the best rates and mortgage products and may engage a mortgage broker in the process.A mortgage broker typically has access to dozens of lenders and can match your needs with the best mortgage products based on understanding your financing goals and needs.You can also choose to shop around directly with various banks prior to your renewal, however, in most cases, using a mortgage broker saves you time and money.  Mortgage Brokers are paid a commission by the lender, which means there’s usually no cost to use a broker to shop around for you and match you with the best product.

    Closing a mortgage switch

    Once you made the decision to move forward with switching mortgage lenders and have been approved by a new mortgage lender, you will need to close your mortgage switch.This process involves paying off the balance of your mortgage to your current mortgage lender, and discharging your current mortgage.   Your lawyer would subsequently register the mortgage in your new mortgage lender’s name.At Deeded, we can make your mortgage switch closing experience seamless with our virtual closing process.
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  • Investing in Fractional Ownership

    Investing in Fractional Ownership

    With historically high Real Estate prices, innovative companies are creating new solutions that have the potential to change how we think about home ownership and even Real Estate investing.With these emerging models, it is critically important to understand what their terms and conditions are and what it means for your rights.   In this blog, we’ll dive into fractional ownership, and dissect what it is and what you should look out for.Fractional ownership has drawn the interest of potential homeowners and investors alike.  Fractional ownership typically takes form when a corporation acquires a property and sells shares of the property to investors.The fractional ownership model is not like co-ownership of a house or building, where a handful of “end-users” own property together.  The model is more geared towards investors who want to invest in Real Estate, but don’t necessarily want to go the traditional route of buying a property and becoming a landlord, or perhaps don’t have the funding needed to do so.Here’s a typical example of fractional ownership.A fractional ownership company like Addy or BuyProperly, purchases a project such as a building, shopping plaza, or a block of apartments.  Typically, fractional ownership companies will create a new corporation that owns the property.  As an investor, you can buy shares (or units) in the newly created corporation, thereby giving you a “fractional share” of ownership in the property.Depending on the company you’re working with, they may have minimum investment requirements and each investment offered may have unique requirements and criteria such as a maximum number of investors.  Some companies may also use other methods to administer fractional ownership.

    How do I make money through fractional ownership?

    The idea is that your investment will generate a return once the company “exits” the investment.  What this means is selling the project to another party, or in some cases, buying out your shares and taking full ownership of the property.   When an “exit” happens, investors usually reap their profits.  For example, if a building was worth $5M at purchase and subsequently sold for $10M, a year later, the investors would typically share in the $5M that is proportionate to their investment.In some instances, income collected from the property, such as rents, may be distributed to investors on a proportional basis.  There may also be ongoing costs (such as maintenance, property taxes, and repairs) that may be the investor’s responsibility during the time you own the property.Before committing to a fractional ownership investment, ask these questions:
    • What is the exit strategy for this property?
    • What is the timing of the exit for this property (i.e.: 6 months?, 1 year?, 10 years?)
    • Will rental income be distributed to investors?
    • Will an investor be responsible for covering operating costs and improvement costs?
    • What has been the company’s history on exits? Have they been profitable?
    • How does the Fractional Ownership company make its money?

    What happens if the property depreciates?

    Like anything else, Real Estate assets are not always guaranteed to appreciate in value.  There may be several circumstances that can depend on the market, the condition and maintenance of the property, and a variety of other factors.While an investor’s intention is to reap a reward, it is important to understand the circumstances. Depending on the investment, this can mean a loss for the investor, or in some cases, even an additional liability, beyond the amount invested.Here are a few questions you can ask:
    • What is the plan and budget to maintain or improve the property? For example, are renovations planned?  What will they cost?
    • If the property is sold at a loss, what happens to my investment?
    • What’s the company’s history on exists? Have any projects been sold at a loss or failed to appreciate?

    How do I make sure I own the investment?

    Being on the “title” of a property is the legal definition of owning a property. Most fractional ownership projects do not include all investors on the title of the property for various reasons such as administration, legal costs, etc.Not being on title, doesn’t necessarily mean you don’t have control or ownership over the property, but it does mean that it is best to ensure there is another legal mechanism that protects your investment.  Those mechanisms can vary from share certificates in the corporation that owns the property, to trust agreements, or contracts.Here are a few questions you can ask:
    • How will I hold ownership in the project in exchange for my investment?
    • If I own shares, what are my rights? Can I sell my shares?

    Our bottom line

    Fractional ownership is a new and exciting model to participate in the Real Estate market as an investor and gain access to properties that are typically reserved for larger (institutional) investors.Like any other investment, asking the right questions and doing your homework can save you headaches down the road and make you a better, more informed, investor.
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  • Closing in a shifting market

    Closing in a shifting market

    As the Real Estate tides shift in the Canadian Real Estate market, you may be one of many homebuyers finding yourself in a stressful situation as you look to navigate your closing in a shifting market.If you purchased a home earlier this year or are closing on a pre-construction property over the next few months, you may find yourself in a situation where your current home has yet to sell, impacting your ability to close your new property as you’re counting on the proceeds from your sale to fund your new purchase.Walking away from your purchase is not likely a viable option and may result in you breaching your purchase agreement.  Breaching your agreement can come with dire consequences like losing your deposit and being sued for damages to make the seller “whole” (which means putting the seller in the same position as the seller would have been had the buyer completed the transaction as scheduled).   (Very Important Note: You should always seek legal advice before making such a decision)There are, however, several financing options and tools you can leverage to still close your transaction and transition to your new home.

    Refinance your current property and/or rent it

    Depending on factors such as your loan-to-value (LTV) ratios and income, you may be able to refinance your current property and use the proceeds for your new property.  You may also be able to rent your current property until selling it becomes more favourable, and have the rental income help in your qualification for a refinance.  While this option isn’t for everyone, it is a strategy that can be used to “weather the storm”, however, just like any market, there are no guarantees that waiting will improve the chances of your property being sold at the price you’re seeking.If you choose to explore this option further, you may need to leverage the services of an experienced mortgage broker who can identify the best lender for your scenario.  Since this scenario may involve you becoming a landlord, you’ll need to understand Landlord/Tenant rules for your province and research market rents prior to considering this as a viable option.

    Take a Loan from friends and family

    As you may need to bridge carrying both properties for a little while, some people resort to asking friends and family for a short-term loan to shoulder the financial burden until your property is sold.If you choose this option and find a family member or friend who will lend you the money, you are best to outline the terms of the loan in a legal contract, outlining the duration, interest, and repayment terms.  Depending on your relationship with the person/people lending you the funds, they may ask to secure their interest in your current or new property by the way of registering a second mortgage.

    Consider a Private Mortgage

    If you don’t qualify for refinancing from a traditional lender, or don’t have friends/family who will lend you the money, accessing funds through a private lender may be a viable short-term option.Most private lenders are more flexible on the risks they can take and have their own lending criteria.  A mortgage broker with a specialization in private lending will likely have access to multiple private lenders and can help identify the best lender for your situation.While private lenders charge higher interest rates (8-12% range) to account for the risk they are taking, they can provide a viable short-term solution with an exit strategy where your loan can be refinanced within a few months with a traditional bank, thereby serving as a temporary ‘stop gap’.1
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  • Statements for Payouts – Why are you being asked for them and what you need to know.

    Statements for Payouts – Why are you being asked for them and what you need to know.

    What are Statements for Payouts?

    If you are refinancing your mortgage to pay out several debts such as credit cards, car loans, etc., you may be required to provide a recent (within the past week or two) statement for each debt to be paid out that shows the following information:

    • Your outstanding balance
    • The account number
    • Your name

    But I’ve already submitted these to my broker or lender, why are you asking for them again?

    Without question, it is frustrating to be asked for the same documents again and again.

    As a rule of thumb, your lawyer will try to use documents your broker and lender has shared with us.  However, there may be a lag of weeks and even months from the time you apply for your new mortgage until closing time.  

    Some statements may be out-of-date and show an incorrect balance as they may have been used or paid down as of late.  A statement within the past week or two provides a more accurate amount that is to be paid out to your creditor and will avoid additional interest and future hassles in paying off your debts.

    What’s the best way to get these statements?

    Most of your statements can be accessed online by logging into your creditor’s website.   Some website provide the option to download a statement, while some may require you to take a screen capture.  

    When you are saving or screen capturing your statements, please ensure your name, account number, and outstanding balances are clearly visible.  Otherwise, you may be asked to resubmit the statement.

    Why does the statement need to show the account number and my name specifically?

    Your lawyer is undertaking payment to your creditors and need to ensure we have the correct account numbers and are paying the correct party.  This is to avoid situations where payment is made to the wrong accounts or made fraudulently.

    Can’t you just do this for me?

    Unfortunately, privacy rules and regulations prevent lawyers from speaking to creditors on your behalf.  At Deeded, we understand that the process of obtaining statements is tedious and time-consuming and are working on various solutions to solve for it in the future.

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  • What exactly is broom swept condition?

    What exactly is broom swept condition?

    If you are selling or buying a home, you may encounter a clause in your agreement that states that your property must be left in “broom swept” or “broom clean” condition.   What exactly does broom swept mean and why misinterpreting this condition can lead to legal arguments and bruised feelings?

    What is broom swept condition?

    Unless professional cleaning was included as a condition within the agreement of purchase and sale, the seller is typically expected to leave the property in what some in the industry refer to as “broom-swept condition”.  Broom swept or broom clean condition typically includes sweeping or vacuuming the floors, removing garbage, emptying cupboards, clearing closets and appliances (if included) and making sure that the property is free of any personal belongings (again, unless they were included).

    A common complaint from buyers when they take possession of a property is that sellers will leave their stuff behind.  From garbage bags to old paint cans, shampoo bottles in the shower, to old furniture, leaving personal belongings behind for a buyer to dispose of can quickly escalate to arguments and even legal ramifications between the buyer, seller, and their respective lawyers.

    Sometimes things are left behind with best intentions.  If you’re selling, you may think the buyer may want to keep something. However, thinking they may want to keep something doesn’t mean that the buyer actually does.  You should ask beforehand, so you know whether to leave it.  Otherwise, you’ll need to take it with you when you leave.

    For buyers, scheduling a walkthrough a few days before closing can also help identify any potential situations where stuff is left behind and allows for the opportunity to speak with the sellers to clarify what’s going and what’s staying.

    My seller left belongings and garbage behind.  What can I do?

    In the situation where your agreement states that the property shall be left in broom swept condition, but you unlock the door to find unexpected items or garbage left behind, document the situation by taking pictures and notify your Real Estate lawyer as soon as possible.  In most cases, your lawyer will communicate with the seller’s lawyer and request they rectify the situation and remove their belongings or compensate the buyer for removal costs.

    I’m the seller.  How should I leave my place?

    Regardless of whether it is in the agreement or not, leaving your place tidy for the buyer is a common courtesy.  No new owner wants to come into their new home to have to get rid of stuff left behind by others.    

    You don’t need to leave your place spotless and immaculate, but most definitely, pack all your personal items and dispose of items you are not taking with you in a proper manner prior to your move-out date.   Leave your property in clean condition, free of dirt, garbage and clutter.

    What if garbage is improperly left on the curb?

    Some sellers think it’s ok if they dispose their items by putting them on the curb and assuming it will be picked up by garbage collection.  

    Every municipality has different garbage collection schedules and may or may not accept some items for disposal.  Therefore, simply putting items on the curb is not a good solution for sellers unless you’re certain that these items will be picked up and are within the guidelines and limits of the municipality.  

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  • Five tips for a quick closing to your mortgage refinance

    Five tips for a quick closing to your mortgage refinance

     

    If you are closing your mortgage refinance, you’ll likely be required to use a lawyer or a title company to close your new mortgage.

    Refinancing a mortgage means paying off an existing loan (mortgage) and replacing it with a new one.  In most scenarios, your new lender may be a different institution than the one that holds your current mortgage and part of the amount you borrow may be used to pay off your existing loan to your current lender.

    Closing mortgage refinance delays are not uncommon and are caused by a variety of factors.  There are, however, multiple things you can do to ensure your mortgage refinance closing happens seamlessly and on time.  Here are some of them:

    Have valid government photo ID

    Since the beginning of the pandemic, many Canadians have not had the opportunity to renew their drivers’ license or passports. 

    While there has been a grace period during the pandemic, a valid government-issued photo ID is required.  If you are planning to close on a property or a mortgage, an expired drivers’ license or passport will not be accepted.  

    Ensure you provide updated debt statements

    If you are refinancing to consolidate debt, your lender may require your lawyer or title company to pay off your debtors out of the proceeds of your refinance.  For your debtors to be paid and to avoid accumulating additional interest, you will likely be asked for the latest statements for each debt.

    If you’ve already provided these statements to your mortgage agent or bank, you may be wondering why you may need to resubmit them again.   Occasionally the mortgage application to approval process may take weeks.  If a statement is out-of-date, the balances to be paid may be incorrect.  Therefore, you may need to obtain statements again for the purpose of closing.

    Statements must contain key items such as your name, your account number, and your most recent balance to be processed.  Most statements can be obtained online through online banking or by calling the company.  It may be a tedious process, but the quicker you can obtain the statements, the quicker your refinance can close and the impact of consolidating debt takes effect.

    Provide your lender with lawyer’s information

    Your lender will require your lawyer’s information to send mortgage instruction to the lawyer’s office.  In most cases, this information will be required when you sign your new mortgage commitment.  Delaying providing your lawyer’s coordinates and contact information to your lender may delay your closing.

    Schedule closing off peak

    Real Estate and Mortgage transactions peak from April through September and because purchases and sales have a firm deadline, chances are your refinance closing may get delayed.  If possible, choosing a closing date in the beginning or the month will increase the chances of your mortgage refinance closing on time.

    Close virtually

    Virtual closing is now an option in most Canadian provinces.  Quite simply, it means that you can sign your closing documents from the comfort of your home, without having to go into a lawyer’s or notary’s office.  

    A virtual closing isn’t only a convenient option, but when it comes to accelerating the closing of your mortgage, it eliminates a lot of the back-and-forth scheduling and time constraints required to book an appointment.   When you use Deeded, our virtual closing experience can be completed in the evenings and even on weekends.

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