Private lending is becoming more and more popular for clients who would like a short term return on their investment. As the bank rules have recently changed, the demand for private lenders is growing. Cardinal Law can walk you through this fairly easy process and the borrower can be responsible for all of your legal fees. Take advantage of our 30 minute free consultation to get the 411.
Buying, selling or refinancing your home is an exciting opportunity and full of possibilities. Your home is usually the biggest investment you will ever make in your lifetime. Cardinal Law has the passion and expertise for Real Estate Law.
FIRST TIME HOME BUYER?
As thrilling as it is, buying your first home can be a little intimidating. Let us show you the way step by step so you feel confident in making your first major purchase.
Q. What is my first step?
A. Once you have an Agreement of Purchase and Sale in place, you should arrange for your agent to email us a legible copy of it and then you should send us your contact particulars, dates of birth and marital statuses. We can then begin working on your file right away.
Q. I know I need a lawyer, but what exactly does the lawyer do in a purchase transaction?
A. We are often asked a variation of this question. There is a perception that lawyers simply search title and some clients have indicated that they could do this themselves. The mechanical steps that lawyers take are not magic - anyone can do it if they go through the learning curve. It is similar to hiring a car mechanic to check a used car you might be buying. The mechanic checks many things on the car and, at the end of that process, issues a Certificate of Mechanical Fitness that you require to transfer ownership. Lawyers do the same thing. While we do not physically inspect your new home, we review title which requires us to do a number of searches. At the end of that process, we issue you an opinion certifying that, subject to some minor qualifications, you are the lawful owner of your home. Can you do these searches yourself? Of course. Just as you could check over a used car yourself, you could check title and other related matters. However, what you cannot do is certify your title.
Q. Why is certifying title so important?
A. Certifying title is the reason why you need a lawyer. We carry errors and omissions insurance. If we make a mistake certifying title that cannot be fixed and it costs you money, our liability insurer protects against those mistakes. If you searched title yourself and made a mistake, there would be no insurance. But, there is a better reason. Most people require a mortgage when they purchase a house. All of the banks agree to use your lawyer for the preparation and registration of the mortgage. Generally, lawyers are not supposed to represent two clients in the same transaction (in this case, you and the bank) because of a conflict of interest, but this is one exception. The banks require a lawyer’s opinion that you are the lawful owner of your home. The banks also require a lawyer’s opinion that its mortgage is a good and valid first charge against the property. The banks have historically dictated what searches are required to be conducted by lawyers prior to giving our opinion so that they can lend you the funds you need to purchase your home. Banks allow us to use title insurance now (which is discussed in greater detail below) and if you chose to take advantage of title insurance, we also are required to give the title insurer an opinion. In the final analysis, we end up giving four opinions - one to you, two to the bank and one to the title insurer.
Q. When do I arrange my mortgage?
A. Once the final closing date has been set, you should arrange your mortgage as soon as possible and advise us which financial institution you will be using and your contact pe together with his/he your mortgage through a mortgage broker, please provide us with this person’s name and contact numbers.
After your mortgage is approved, your financial institution typically forwards your information to a mortgage processing centre. The mortgage processing centre then forwards instructions to us as to how to complete the mortgage documentation. It is these instructions which we need at least one week prior to closing. Please confirm with your bank or mortgage broker that they will provide us with these instructions within this time frame. If we do not receive these instructions at least one week prior to closing it could result in increased fees and disbursements.
Q. When will I need to see you to sign the closing documents?
A. We generally arrange appointments 3-7 days prior to closing. However, it could be several days before closing or the day of closing depending on a number of factors which are beyond our control. Real estate closings are unpredictable and can be very complicated, which is why you must try to make yourself available to us and keep your time as flexible as possible prior to closing to attend at our offices. While we understand that this may be potentially disruptive to your work schedule, please note that you will have to attend our offices during work hours.
Q. Will I get the keys when I come to your office?
B. No. There is often a misconception by purchasers as to how keys are exchanged between the parties. You do not receive your keys when you attend at our offices. The standard procedure is for the vendor’s lawyer to exchange the keys with the purchaser’s lawyer on the day of closing in return for the funds required to purchase the property. This procedure is often referred to as “the closing”.
NEW HOME: Because you are buying from a developer, often the builder will arrange to have keys released on site on the date of closing once the builder’s lawyer has received the necessary closing documents and funds. That may occur at any given time in the day depending on when documents are exchanged amongst the lawyers and the Deed is registered, which can be as late as 5:00 p.m. on the day of closing. Keys can be picked up at the site at that time. As the closing may not happen until later on in the day, we therefore do not recommend that you schedule moves or contractors for the day of closing.
NEW CONDO: If you are buying a condominium unit from a builder, you will receive
keys on interim closing. Often the builder will arrange to have keys released on site on that date once the builder’s lawyer has received the necessary executed interim occupancy documents and funds. That exchange may not happen until later on in the day and we therefore do not recommend that you schedule moves or contractors for the day of closing.
RESALE HOME/CONDO: The closing may occur at any given time in the day depending on when documents are exchanged amongst the lawyers and the Deed is registered, which can be as late as 5:00 p.m. on the day of closing, at which time keys can be picked up from our office. If there is a need to obtain keys quickly, you should make the appropriate arrangements with your real estate agents. If you choose to make arrangements with your real estate agent to obtain keys, please let us know at least one week prior to closing so that we are not expecting keys on closing. For your information, the real estate agents cannot release keys to the purchaser until confirmation is received from the vendor’s lawyer that the transaction has been completed. Because there is no guaranty as to when you will receive the keys, we do not recommend that you schedule moves or contractors for the day of closing.
Q. How will I know how much money I need to bring with me when I meet with you?
A. Once we receive the Statement of Adjustments from the vendor’s lawyer, we will prepare a Funds Flow that will set out the adjusted balance due on closing, Land Transfer Tax and registration fees, our legal fees and disbursements. We add these figures together and then subtract the amount that we expect to receive from your bank. The difference is what you will be required to bring in. BECAUSE WE HAVE NO CONTROL AS TO WHEN THE VENDOR’S LAWYER WILL PROVIDE THE STATEMENT OF ADJUSTMENTS TO US, WE OFTEN CANNOT PROVIDE YOU WITH THAT FIGURE UNTIL A FEW DAYS BEFORE CLOSING. A good rule of thumb when purchasing from a developer is to budget for 3 ½% TO 4% of the purchase price to cover closing costs (i.e. land transfer tax, legal fees and disbursements and adjustments), plus the balance of your downpayment. This will give you an approximate idea of how much you will need to bring in. Another matter you should consider in calculating your closing amount is that often the bank does not advance the entire amount of the mortgage. It is not unusual for the bank to deduct an interest adjustment if your mortgage payments are going to be made on the first day of the month. Or, if your mortgage is being insured by Canada Mortgage and Housing Corporation, the PST on the CMHC premium is deducted from the mortgage advance. If you are having your mortgage insured, you should check with your bank to find out exactly what amounts will be deducted from your mortgage advance.
Q:What is CMHC Mortgage Loan Insurance?
A:Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment starting at 5% with interest rates comparable to those with a 20% down payment.
To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.
Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.
Q. Should I bring a bank draft or certified cheque?
A. We require you to bring a bank draft made payable to Cardinal Law PC in Trust. In addition, when you attend at your bank to purchase the bank draft, please obtain the business card of either the person who prepared the bank draft, or the person who will be able to verify its authenticity at the branch. In addition, please keep and bring with you the receipt for the bank draft purchased as that will assist us in verifying its authenticity.
Q. How should ownership in the property be taken?
A. The two most popular methods in which individuals take title to real estate in Ontario are as "Tenants in Common" or as "Joint Tenants". Most often, married couples prefer to own property as joint tenants because, on the death of one or the other spouse, the deceased spouse's interest passes directly to the surviving joint tenant. In comparison, property owned by unrelated persons as investment property is generally held as Tenants in Common because, upon death, the deceased's interest passes to his or her estate.
Q. Do I need an up to date survey?
A. NEW/RESALE HOME: Having an accurate survey is recommended. If the vendor has not agreed to supply a plan of survey, we recommend that an up-to-date survey of the property be made by an Ontario Land Surveyor. Such a survey is a necessary prerequisite to our full opinion on title and is also generally required by institutional lenders (banks or trust companies) before an advance on a mortgage loan will be made. If you choose not to get an up-to-date survey, our opinion on title will be qualified accordingly. The alternative to an up-to-date survey is to select the Title Insurance option which may give you the protection lost by our qualified legal opinion without the extra cost of a new survey. Please be sure to carefully review the survey provided in this transaction and advise us immediately if you notice any irregularities, inconsistencies or omissions once it is compared to the property in its present form.
Q. How are property taxes handled?
A. NEW HOME/CONDO: At the outset, the City will have assessed the land value only and it is likely that the tax adjustment by the developer will be based on land taxes only. Alternatively, the developer may estimate your individual lot’s property’s taxes and
adjust based on that figure. At some point after final closing, perhaps two to three years, the City will assess each lot separately and issue each owner a supplementary tax bill or omit tax bill, as it is sometimes called, dating from the date of your ownership. It is very important that you understand who is responsible for the realty taxes and from what date you are expected to pay the property taxes. You should read your agreement carefully with respect to this issue. It is your responsibility to contact the developer once you receive these supplementary or omit tax bills to be reimbursed for its proportionate share of the taxes prior to your ownership of the property. We would be happy to undertake this on your behalf if you wish but we will have to charge you fees based on our hourly rate at that time.
Q. Should I be concerned about environmental matters?
A. Yes you should concern yourself with environmental issues. First and foremost, you should ensure that there is no urea-formaldehyde foam insulation in your house. Your agreement will probably contain a warranty in this regard. We wish to advise you that our legal opinion will be subject to those items which an environmental audit might disclose. Environmental audits are not standard in residential transactions; however, we recommend that if you have concerns in this regard, you should obtain such an audit prior to closing. In the absence of your instructions to the contrary, we will assume that you have deemed an environmental audit unnecessary and have instructed us accordingly.
Q. Do I arrange for insurance on the property?
A. NEW/RESALE HOME: Yes. It will be necessary for you to contact your insurance broker to arrange full replacement cost insurance on the property being purchased, to be effective from the date of closing, and showing loss payable to all mortgagees (bank or trust company). You will therefore need to give your broker your financial institution’s name and address. Please make these arrangements early and, once you have made them, we will require a copy of the insurance policy from your broker prior to closing. Please advise your broker of our firm’s name and fax number and instruct him/her to forward confirmation to us prior to closing.
NEW/RESALE CONDO: The Condominium Corporation building, all of the units and the common elements are covered by a blanket insurance policy. However, you will also need insurance for your personal property and improvements made to your unit. Therefore, you should contact your insurance agent and/or broker as each insurer has special insurance for condominiums. The Standard Unit By-law will determine what your insurance will cover and what the Corporation’s insurance will cover.
Q. Do I have to contact the utility companies?
A. NEW/RESALE HOME: Yes, it is good idea to contact the utility companies to ensure that the accounts are set up in your name as of the date of closing. If you are buying from a builder, you should do that closer to the closing date as the closing date is likely to change from time to time. It is also a good idea to contact cable and Bell to ensure that
services will be up and running when you move in.
B. NEW/RESALE CONDO: Yes, if there are utility services that are separately metered and not covered in the monthly maintenance fees. It is also a good idea to contact cable and Bell so that services will be up and running when you move in.
We also suggest that a few weeks after closing, you call the City to confirm that the tax account is in your name.
Q:What is Title Insurance?
A:Title Insurance is a one time premium that protects your ownership interest (i.e., title) of your property from losses incurred as a result of unknown title defects or other covered matters that exist at the time of your purchase, but are unknown to you at that time. Title Insurance is required by all financial institutions and it may also eliminate the need for certain searches, the most notable being the requirement to obtain an up-to-date survey of the property, the cost of which can be significant. The policy coverage amount is generally the amount you paid for your property.
Some examples of what title insurance covers: