Refinancing your home involves registering a new mortgage on the title, and usually removing an old mortgage or secured line of credit.
Often, you will be required to pay off other debts (e.g. credit cards, car loans, outstanding property taxes, etc.) as a condition of the new mortgage. There could be other requirements as well.
Refinancing your home can be stressful, particularly if it is your first time or if you are dealing with a new lender. There are a lot of steps involved and the bank may impose many requirements that can seem frustrating or confusing.
We will try to explain the general process here and some of the common obstacles you may encounter. If you cannot find the answer you are looking for, you can always call, email or come see us and we would be happy to answer your questions.
The first step is to choose a lender for your new mortgage. If you have a good relationship with your bank, that is a good place to start.
Some people will shop around and compare interest rates and terms among different banks.
You can also hire a mortgage broker, who will shop around for you and show you different available options.
Once you have chosen a lender, you will need to be approved for the mortgage.
This will involve a credit check and providing your broker or lender with various documents, such as T4s, pay stubs, letters from your employers, and banking statements.
Once you are approved for the mortgage, you will need to sign some documents in front of a lawyer or notary public.
Your lender or broker may suggest someone, but you are free to choose whoever you like.
Some properties can be complicated to deal with and not all legal professionals can do all properties (e.g. leasehold properties). If you are not sure if your notary or lawyer can deal with the property you are refinancing, it is best to call them to confirm in advance.
Once you have chosen your legal representative, you can tell your lender or broker and they will send your representative “mortgage instructions”, which explain the requirements for the new mortgage.
Once we receive mortgage instructions from your lender, we will contact you to confirm that you want us to represent you, book an appointment to sign the closing documents, and will request the following information:
If we are adding or removing a name on the title of the property, then more information will be requested, such as:
The first step of document preparation involves gathering documents and information, including:
The next step is to prepare and assemble the documents for the new mortgage. This includes:
If you are adding or removing a person on the title, then your documents will also include:
Once the documents are ready, you will meet with us to sign them. We will go through and explain each document and answer all your questions.
You will need to bring two pieces of identification, with at least one being government-issued, unexpired photo identification. See below for more information on what types of identification are accepted.
At this time, you can also indicate how you would like to receive the net mortgage proceeds (money leftover) from your refinance (e.g. cheque or direct deposit).
You may also be required to bring certain documents to the appointment, such as post-dated cheques, a void cheque, or statements for your credit cards or other debts that we are paying out.
If you are required to bring any documents to your appointment, you will be notified in advance.
On the “advance date” (completion date of the refinance), the new mortgage will be registered and the mortgage proceeds will be sent to us from your lender.
We will use those mortgage proceeds to pay out your existing mortgage and any debts (e.g. credit cards, car loans, etc.) as per your lender’s mortgage instructions, and the net mortgage proceeds will be delivered to you.
Normally, you will either receive a cheque or a direct deposit on the advance date or the following business day (see below for more information).
After the transfer completes, we need to make sure that any mortgages, judgements or liens that were previously on the title have been properly removed.
Once that has been done, we report back to you and provide you with a copy of the State of Title Certificate (official document from the land title office confirming the changes on the title), and the file is closed.
When you come to our office to sign documents for your purchase, we will need to confirm your identity.
Typically, we will need two pieces of ID: a primary piece and a secondary piece.
Your primary piece must be government-issued, unexpired photo identification. We cannot accept employment badges or cards, even if your employer is a government agency.
The most common forms of primary ID provided are:
We will also need a secondary piece of ID. The most common forms of secondary ID are:
A holdback is a term used for when a certain amount of money is to be withheld until confirmation that a condition of the new mortgage has been satisfied
If we are paying out an existing mortgage, there will be a holdback to ensure that no mortgage payments were missed.
We simply hold the amount at our office until we receive a discharge from your lender.
When we receive a payout statement from the bank telling us how much money is required to obtain a discharge, it will often account for any payments you will be making up to the completion date.
If you miss a payment just before the completion date, we may not find out until several weeks after your sale completes.
If this happens, the bank will not give us the discharge until we pay the outstanding amount. We hold back a certain amount to make sure we have enough to obtain the discharge.
Your mortgage commitment is essentially your loan agreement with the bank. It will show you the principal amount (how much you borrowing), interest rate, term, amortization, and your prepayment penalties and privileges.
Your disclosure statement will usually contain all of the above information, but it will also show you the “cost of borrowing” or how much money you will pay in interest over the term (if you do not change your payments).
In most cases, you will receive the net mortgage proceeds on the advance day or the following business day.
The net mortgage proceeds will be in the form of a cheque or can be directly deposited to your bank account if you provide us with your account information in advance (e.g. void cheque or pre-authorized deposit form from your bank).
If you choose to receive a cheque, the cheque will be made out to all registered owners on the title. For example, if the property was owned by three individuals, then all three of their names will be on the cheque.
If you choose to have the funds directly deposited to your account, then all the registered owners’ names must be on that account.
For example, if the property was owned by three individuals, then all three of their names must be on the bank account as joint account holders.
We do not divide the net mortgage proceeds (i.e. “split cheques”) for the borrowers. We do not want to be responsible for determining or confirming who is entitled to what percentage of the funds, regardless of any previous arrangement the borrowers may have.
Refinancing a property can be expensive depending on the requirements by the lender.
The more they require, the more you can expect your total costs to be. In most cases, these fees can be paid from your mortgage proceeds, so you do not have to pay anything out-of-pocket. They will be deducted from the money you are borrowing.
Sometimes there may not be enough money coming from the new mortgage to pay all the debts and fees, in which case we may require you to bring in money so we can complete the refinance.
There will always be legal fees. If you are getting a mortgage from an institutional lender (e.g. bank or credit union), then usually you will only pay your notary or lawyer’s legal fees.
If you are removing or adding a person on the title of the property, the legal fees will increase. If your lender requires your notary or lawyer to payout multiple debts, there will be additional fees for that as well.
If you are getting a private mortgage through a broker, then you will be paying your legal fees as well as the lender’s legal fees, which can be quite high. There may also be “broker fees” to pay as well. These should be disclosed by your mortgage broker before signing the closing documents.
Some lenders will charge appraisal fees, wire transfer fees, or other administrative fees.
Most lenders require title insurance and an insurance binder proving that the property is insured against fire or other losses.
Most lenders also require that we pay any outstanding strata fees, strata levies, property taxes or utilities.
Ideally, your new mortgage amount will be enough to pay off your old mortgage, any other debts that we are required to payout, and all fees and costs. With good planning, you will not have to pay anything out-of-pocket and may have money left over in the end (net mortgage proceeds).
When you are getting a new mortgage, your lender may require that certain debts are paid as a condition of the new mortgage. To pay these debts, we require statements from the creditors to indicate how much is owing and how to pay them. Some of these statements can be directly obtained by us and others will need to be provided by you. We must receive these statements before the new mortgage can be advanced.
Some statements may be easy to obtain and others can be more difficult. If you have reason to believe that you may have difficulty obtaining a statement from a creditor, please let us know as soon as possible.
If we cannot receive the necessary statements before the advance date, we will not be able to meet the lender’s requirements and we will not be able to complete your refinance.
The statements must contain your name, the account number, and the current balance of the account. If the statement does not show the current balance then you must inform us of what the current balance is.
If you do not receive statements, we can sometimes use screenshots from your online banking, as long as it shows the account number and the current balance owing.
When we are obtaining statements directly from creditors, they sometimes require your permission to do so. A phone call from you to the creditor is usually sufficient in these cases.
Some creditors may only send statements by mail and will refuse to fax or email them. If this is the case, then you should account for the time it will take for you to receive this statement. You should request the statement as early as possible to ensure that it will arrive in time for the advance date.