Mortgage Instructions – Getting Started
If you are mortgaging the property you are purchasing, your lender will send us the mortgage instructions. The instructions provide us with specific information so that we can prepare the appropriate documents. We then do all the necessary searches and prepare the mortgage and any related documents. Our work can only start once we receive the mortgage instructions. Receiving these documents well in advance of closing increases the likelihood of closing on time. Any efforts you and your mortgage broker (if you are working with one) can take to encourage the lender to provide us with mortgage instructions sooner rather than later are helpful. If you have not done so, please provide us with the contact information for your lender and broker. The name of a specific person and direct contact information is the best.
Mortgage Amendments
Think twice about changing your mortgage at the 11th hour. Typically, any changes to the mortgage such as reducing the amortization period or increasing the down payment results in the lender sending us a completely new set of mortgage instructions. If we have already prepared the mortgage documents they will have to be prepared all over again. This will result in additional charges to you along with possible delays in completing the documents and completing the purchase.
Bridge or Interim Financing
If you are selling and buying at the same time, especially if the purchase takes place prior to or on the same day as the sale of your existing property, you may require interim or bridge financing. This is an amount you borrow from your lender to ensure you have sufficient funds to complete your purchase pending receipt of your sale proceeds. Even if the sale closes before your purchase, interim financing can save a lot of stress and uncertainty. If there is a delay (which can happen for a number of legitimate reasons) in receiving your sale proceeds, without bridge financing the closing of your purchase will be delayed until the sale proceeds are received. If you have any questions or concerns about whether bridge financing applies to you or the particulars of bridge financing, please contact your lender, your realtor, or one of our team members.
Funding Your Mortgage
Are all the conditions for funding the mortgage fully and completely satisfied? We have a long litany of stories we can share about delayed funding where the borrower failed to provide the broker or lender with items such as proof of last year’s income or proof of payment of outstanding balances on credit cards. Talk to your lender or broker to make sure you understand exactly what they require. For example, a two-month old credit card statement with a bank stamp may or may not be adequate. The lender may require a current statement showing a zero balance.
House Insurance
It is your responsibility to obtain comprehensive insurance coverage on your house. This will include coverage for loss by fire and any other named perils either your lender requires or you desire. We must receive written proof, typically by fax directly from your insurance broker, of this insurance coverage before we can fund your mortgage and close the deal. This coverage must be equal to or greater than the amount of the mortgage or must include an endorsement stating that it provides “guaranteed replacement coverage”. The insurance policy must name your lender as a loss payee. We will send you complete particulars of exactly how your lender must be described on the insurance policy, once all the details regarding your lender are finalized.
Your Money
What about the money? When we are ready to meet with you, we will send you an e-mail. It will contain details of the amount required to complete your purchase. This amount (shortfall funds) will include various adjustments such as property taxes, condominium fees (if required) and the amount required to pay our invoice. The shortfall funds must be in the form of a bank draft.
Mandatory Community Fee
Many newer communities in Edmonton have a mandatory community fee. This fee is used to maintain common elements in the community such as community recreation facilities or community landscaping. These fees tend to range from $50 per annum up to $350 per annum. There will be an adjustment on closing to ensure the seller pays their appropriate share and you pay your share of the community fee for the current year.
Condominium Fees
All condominium fees must be paid up to and including the Completion Day. It is the seller’s responsibility to pay all condominium fees when they are due. You , as the purchaser, are required to re-imburse the seller for your share of the closing month’s condominium fees. For example, if your purchase closes on the 5thday of the month, the seller must pay the monthly fee in full, even though the seller’s portion is quite small. The Statement of Adjustments will contain a credit to the seller for your share of the montly fee. The credit becomes part of the closing costs.
Sometimes, the condominium board of directors will determine they require special extra payments to pay for needed repairs and upgrades. These are called special assessments. The seller has a responsibility to disclose to the buyer everything they know about any upcoming special assessments. Payment of these assessments can then be negotiated between the parties.