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Home Buyers' Mortgage Guide


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tABle	of	contents

   A.	IntroductIon 	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 3
   B.	MortgAge	QuAlIfIcAtIon	Procedures	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 4
       B1. General Information .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
       B2. Job Stability  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
       B3. Sources Of Income  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
       B4. Employment Income Verification  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
       B5. Other Sources Of Income  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5
       B6. Credit History  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5
       B7. Source Of Down Payment  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 6
       B8. Income And Expenses (GDS/ TDS Ratios)  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 7
       B9. Property Information And Documentation  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 7

   c.	MortgAge	And	ProPerty	defInItIons 	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 8
       c1. Conventional  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
       c2. High Ratio .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
       c3. Freehold Ownership  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
       c4. Leasehold  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
       c5. Condominium  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
       c6. Co-operative  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
       c7. Joint Tenancy  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9
       c8.	Tenants In Common Or Undivided Owner Ship  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9
       c9.	Fractional Interest Properties  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9

   d.	MortgAge	oPtIons . 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	 10
       d1. Closed Mortgage  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
       d2. Open Mortgage  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
       d3. Convertible Mortgage  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
       d4. Fixed Rate Mortgage  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
       d5. Variable Rate Mortgage .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 11
       d6. Payment Options  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 11
       d7. Amortization And Payment Frequency Comparisons  .  .  .  .  .  .  .  .  .  .  .  .  . 11
       d8. Portable & Assumable Mortgage  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 12
tABle	of	contents

   e.	cMhc	PolIcIes	&	Procedures	.	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 13
       e1. What Is CMHC’s Role?  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13
       e2. CMHC Fees & Premiums  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13
       e3. Extended Amortization Options .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
       e4. CMHC’s 1 - 4 Unit Rental Program  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
       e5. High Ratio Financing For Self Employed Applicants  .  .  .  .  .  .  .  .  .  .  .  .  .  . 15
       e6. CMHC Second Home Lending Program  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 15

   f	.	other	governMent	IncentIves . 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	 16
       f1. Using Your RRSP For Down Payment  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 16
       f2. Property Transfer Tax Information .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 16

   g.	closIng	the	deAl . 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	 17
       g1.	Estimated Costs  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17

   h.	MortgAge	PAyMent	cAlculAtor	.	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 18	

   I.	non-resIdent	lendIng. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	 19
       I1. Non-resident Lending  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 19
       I2. Whistler Condo Financing  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 19
       I3. How Canadian Mortgages Work  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 20

   J.	constructIon	fInAncIng	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 .	 21
       J1. Understanding the Construction Financing Process  .  .  .  .  .  .  .  .  .  .  .  .  .  . 21-23
       J2. Construction Financing Example Sheets  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24-27

   K.	glossAry	of	MortgAge	&	reAl	estAte	terMs . 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	. 	 28-34

A.	IntroductIon	

   For most people, buying a home will be the largest purchase they will ever make . Besides
   being a necessary source of shelter for you and your family, it may also be an important
   investment for your future .

   As mortgage brokers it is our job to find you the best possible mortgage financing for your
   own unique situation . The following is a list of just a few of the lenders we work with on your

   • CIBC
   • Citizen’s Bank (owned by Vancity)
   • Concentra
   • First National
   • FirstLine Mortgages
   • HSBC
   • Home Trust
   • ING
   • Macquarie Financial
   • MCAP
   • Merix Financial
   • National Bank of Canada
   • North Shore Credit Union
   • President’s Choice Financial
   • Scotiabank
   • Squamish Savings (owned by Vancity)
   • TD/Canada Trust

   We would be pleased to assist you with your home purchase . Application can be made by
   telephone, fax, or on-line . We even do house calls .

   This guide has been developed to assist and guide you through the home buying and
   financing processes. It will provide you with the information necessary to make an informed
   decision about purchasing and financing your new home.

   We are able to arrange 1st / 2nd mortgages for purchases and/or refinance for both
   residential and commercial property. Construction financing, transfers/switches, & lines of
   credit are also provided . In some cases broker / lender fees may be charged, but not without
   your consent .

B1.	generAl	InforMAtIon	
There are many factors taken into consideration when a lender is qualifying you for a mortgage . Among the
deciding factors are: family income and job stability, past credit history, net worth (assets minus liabilities),
source of down payment, the amount of the mortgage and its percentage of the value, and finally your debt
service ratios. You will be asked to fill out a mortgage application and authorize the institution to perform a
credit investigation (also called a Credit Bureau or “Bureau” for short) . There are many sources of funds for
financing: banks, trust companies, life insurance companies, other finance companies and private lenders.

B2.	JoB	stABIlIty	
Lenders like to see the progression of your employment over a two to five year period. Generally speaking, the
minimum length of time on your current job that is considered acceptable is 1 year . If you have been employed
less than 1 year in your current job, the lender may make an exception provided your current job is related to
your previous one (i .e . in the same industry) or you were previously in school .

B3.	sources	of	IncoMe	
Whether you are a salaried, hourly or commission-based employee, the lender will require proof of your
income. In order to “use” your income for qualification purposes, the lender must be confident that it is:

 a) Stable and likely to continue over a reasonable period of time, and
 b) Declared to the government on your income tax return .

Any income that is earned as “cash” or “under the table” cannot be used to qualify you for a mortgage .
It is up to the lender to decide what is appropriate in each case . If you are self-employed, the income
verification process is a bit more complicated in that you will have to provide a minimum of 2 years’
worth of business financial statements and tax returns.

B4.	eMPloyMent	IncoMe	verIfIcAtIon	

   B5.	other	sources	of	IncoMe	
   As with employment income, you will also have to provide proof of any other sources of
   income you may have . Below are some of the most common sources of income and the
   documentation required:

   In all of the above cases, the lender may request 2-3 years’ copies of your Canada Revenue
   Agency Notice of Assessment to confirm the amount of these incomes.

   B6.	credIt	hIstory	
   Since your past credit activity is considered to be the best indicator of your future ability
   and/or willingness to repay debt, the lender will rely heavily on your credit rating to make a
   lending decision . They will request a credit report from your local credit bureau . This report
   is referred to in the industry simply as a “bureau” . The bureau will show all your past credit
   activity including loans, credit cards, lines of credit, collections, judgments, and bankruptcies
   for the past 7 years . Each item on the bureau is given a rating from 0 to 9 . Zero represents an
   inactive account and 9 represents a “written off” or bad debt . The best rating is a 1 . You will
   hear terms such as “I2” or “R9” which are the codes given to evaluate each debt reported on
   the bureau . The rating will start with either an R, I, or O depending on the type of debt, but
   the number of ratings all mean the same thing .

   To avoid surprises or misunderstanding, it is best to be up front about any past credit
   problems you may have had . As long as your past credit problems are supported by a valid
   explanation, they will be considered to be part of your past and you may still be approved for
   a mortgage .

   There are two credit bureau reporting agencies, Equifax and Trans Union . Their web sites are
   as follows:
                 • www .equifax .ca    • www .tuc .ca
   B7.	source	of	down	PAyMent	
   The lender will also want to know where your down payment is coming from . That is, have
   you saved the funds yourself over a period of time? Do you have stocks, bonds, RRSPs,
   mutual funds or other investments that you are cashing? Are you receiving a gift from a
   relative? Are you selling an asset you already own? Are you refinancing an existing property?

   The amount of down payment relative to the purchase price will also be evaluated . A lender’s
   decision to approve the mortgage application will also take into account what percentage of
   equity you will have in the property . For example, are you putting down 25% of the purchase
   price from your own savings or will you be receiving a gift for 5% of the purchase price? The
   more equity you have from your own funds, the stronger your application is considered to be .

   Wherever your down payment is coming from, the lender will require documented proof of
   its source:

   B8.	IncoMe	And	exPenses	(gds/tds	rAtIos)
   Historically, lenders and high ratio insurance providers (CMHC, Genworth) maintained the
   qualifying formula shown below as a guide for income to debt ratios . Recently, in the last
   couple of years, this formula has been relaxed . Depending on your credit history (a minimum
   beacon score of 680 is required) and your level of downpayment, you may be eligible for no
   GDS and a TDS of up to 44% . What does this mean for you? It means that your income is
   recognized to carry more for a mortgage which may help you purchase the property that you
   really wish for .

   GDS (Gross Debt Service) and TDS (Total Debt Service) ratios are the two factors that lenders
   and CMHC take into consideration when they are determining how much of a mortgage you
   qualify for . These ratios take into account your gross family income (before taxes) and divide
   that into your expenses . The maximum GDS ratio is 32% and the maximum TDS is 40% .
   These are the accepted industry guidelines . GDS and TDS are calculated as follows:

   GDS =          Mortgage Payment + Property Taxes + Basic Heat + 1⁄2 Condo Maint Fee
   (Max 32%)                                   Gross Family Income

   TDS = Mortgage Payment + Property Taxes + Basic Heat + 1⁄2 Condo Maint Fee + Other Exp*
   (Max 40%)                                   Gross Family Income

   *includes loan, credit card, and other monthly obligation

   B9.	ProPerty	InforMAtIon	And	docuMentAtIon	
   After evaluating you as a mortgage applicant, the second part of the mortgage approval
   process looks at the property you are purchasing . As mortgagee, the lender will be concerned
   with the property they will be using as security for their mortgage . They will want to know
   the specifics of the property, namely, the purchase price, location, and size. Your lender may
   require some or all of the following documents:

   1 . A fully executed copy of the Agreement of Purchase and Sale along with all the attached
       schedules, amendments and waivers . Fully executed means that all the pages, additions,
       and changes have been signed and/or initialed by all parties .

   2 . An MLS listing or feature sheet and picture of the property . Among other things, this
       contains details of the location, condition, asking price and features of the home .

   3 . A recent appraisal of the property to determine the lending/market value .

c.	MortgAge	And	ProPerty	defInItIons	
   Below are the definitions of some of the more common terms you will hear with respect to your home
   purchase and financing.

   c1.	conventIonAl	
   The conventional mortgage is one that is offered on new and existing homes for up to 80% of the
   purchase price . This means that the home buyer must have at least 20% of the purchase price
   available for a down payment . Conventional mortgages do not normally have to be insured through
   CMHC or Genworth .

   c2.	hIgh	rAtIo	
   The term high ratio refers to mortgages that represent more than 80% of the value of the purchased
   property . High ratio mortgages must be insured through CMHC (Canada Mortgage & Housing
   Corporation), or Genworth . The insurance premium that is paid to CMHC is to protect the lender in the
   event that the mortgage is not paid and the bank has to take back the property . This is not the same as
   mortgage life insurance. The benefit to the borrowers is that it allows them to purchase a home with as
   little as 5% down .

   c3.	freehold	ownershIP	
   Owner has title to and full use of the land and buildings on it over an indefinite period.

   c4.	leAsehold	
   A person has use of the property for a limited time . Usually, the land is owned by the federal, provincial or
   municipal government and land lease payments are made to them . In the case of a residential home purchase,
   the purchaser owns the building but not the land on which it sits . The term “leasehold” can also refer to
   situations where both the building and the land are being leased .

   c5.	condoMInIuM	
   Owner has full and sole use of a housing unit . The owner shares ownership of common space such as
   parking garage, and recreation areas with others who all belong to the same condominium group . Since
   ownership of common space is shared, so are repair, maintenance and replacement costs . Usually these
   expenses are covered through the strata maintenance fees .

   c6.	co-oPerAtIve	
   Persons have a share in a residential project . They do not have ownership of a particular unit, but as
   shareholders they each have use of a unit .

c.	MortgAge	And	ProPerty	defInItIons	
   c7.	JoInt	tenAncy	
   If you buy a home with another person or with several other people, many types of ownership
   agreements can be in place . As joint tenants, each owner holds an equal share in the property
   regardless of his or her individual financial contribution. If an owner dies without any specific
   arrangements having been made, his or her share is automatically transferred to the other owner(s) .

   c8.	tenAnts	In	coMMon	or	undIvIded	ownershIP	

   Each owner holds a specific portion of the property but the portions do not have to be equal.
   Each individual owner can sell or assign his or her share to any other person, subject to any
   restrictions that were originally stated in the deed . Rights of survivorship do not exist in this
   case, so upon the death of one of the owners, their share becomes part of their estate and
   is dealt with according to the provisions set out in their will . Or, if no will, according to the
   relevant provincial law .

   c9.	frActIonAl	Interest	ProPertIes	
   Fractional Interest properties come in many varieties . The most common are quarter
   share, tenth share, and time share (1/51st) . The title structure for most Fractional Interests
   includes a proportionate share of the fee simple title, which is charged with a headlease to
   a management company or owner’s association, and a sublease of the headlease, which
   defines when occupation associated with the fraction actually takes place. In some instances
   (Montebello, Whistler, BC) the owner also receives a share of the company that holds the
   headlease .

   The choice of Lenders may be limited for these Fractional Interest properties . If the title
   structure is unconventional, then finding a lender may be much more difficult as there may
   be no formal structure to allow the lender to foreclose if they have to .

   One lawyer cannot act for both borrower and lender in financing Fractional Interests. The
   borrower will have to pay for both their lawyer and the lender’s lawyer, so the costs of
   closing a Fractional Interest property are greater .

d.	MortgAge	oPtIons	
   d1.	closed	MortgAge	
   The term ‘closed’ mortgage refers to the fact that there are penalties incurred in the
   event the mortgage is fully paid, either from sale of the property, a refinance to a different
   lender, or from your own resources . Some ‘closed’ mortgages can only be paid off from
   the sale of the property . The penalties can vary depending on if you are in a closed
   fixed rate mortgage, or a closed variable rate mortgage. It is best to obtain the specific
   penalty policy from your lender regarding the specific type of mortgage you are taking.
   Most lenders allow prepayments based on a certain percentage that can be paid each
   year, the percentage varying depending on the lender . The usual range is 10 to 20%
   per annum, and based on the original amount borrowed. Closed fixed rate mortgages
   usually have a lower rate than open mortgages, and are a good choice for those who
   want the security of knowing their mortgage rate and payments will not change until the
   end of the mortgage term .

   d2.	oPen	MortgAge	
   Allows borrowers to repay all or part of the total amount of their mortgage at any time without
   penalty. Because of this flexibility, this mortgage is ideal for borrowers who plan to sell their
   homes or otherwise pay out their mortgage in the near future . An open mortgage also provides
   flexibility for mortgagors who may wish to take advantage of lower rates and lock in (convert)
   to a longer term mortgage at a moment’s notice . However, if the sole reason for wanting an
   open mortgage is to allow conversion to a longer term, the mortgagors may be better served
   by obtaining a convertible mortgage .

   d3.	convertIBle	MortgAge	
   A closed, short term mortgage, usually 6 or 12 months, which allows the borrower to switch
   into a longer term at any time without penalty . The rate is usually lower than the open
   mortgage because the only option available is to convert . These mortgages are best suited
   for people who want to watch the market over the short term before deciding if and when to
   lock in .

   d4.	fIxed	rAte	MortgAge	
   Both closed and open mortgages can have the feature of a fixed rate. This means that the
   rate of interest is set for the term of the mortgage, which may be as long as 25 years or as
   short as 6 months . Because of this, the regular payment amount of the principal and interest
   remains the same throughout the term .

d.	MortgAge	oPtIons	
   d5.	vArIABle	rAte	MortgAge	
   The rate of interest changes from time to time as money market conditions change, but
   usually no more often than once a month . This type of mortgage was developed in order
   to provide maximum flexibility to borrowers in times of volatile or fluctuating interest rates.
   Although the interest rate charged on the mortgage fluctuates, the amount of the regular
   payment usually does not change throughout the term of the mortgage . Because of this,
   the rate fluctuation will affect the way each payment is applied. Since payments are made
   up of both principal and interest, when rates go down, more of the payment will be applied
   towards the principal . If interest rates rise, more of the payment goes towards interest . If
   interest rates rise dramatically, the borrower may be required to make a lump sum payment
   against the mortgage, or increase the payments to ensure pay down as per the original
   amortization . Most variable rate mortgages offer conversion options to allow you to “lock-in”
   to a fixed rate mortgage term.

   d6.	PAyMent	oPtIons	
   Payments are usually made either monthly, bi-weekly, weekly, or semi-monthly . Bi-weekly
   means every 2 weeks, weekly means every week, and semi-monthly means twice a month .
   By paying bi-weekly or weekly you pay the equivalent of approximately 1 extra monthly
   payment against the principal per year and this helps to pay your mortgage off sooner .

   d7.	AMortIzAtIon	And	PAyMent	freQuency	coMPArIsons	

   Mortgage Amount: $100,000               Interest Rate: 8%         Amortization: 25 years
   Interest Paid*:  $128,964.04

   *Assumes a constant rate of interest

d.	MortgAge	oPtIons	
   d8.	PortABle	&	AssuMABle	MortgAges	
   Portability and assumability features offer additional flexibility. Portable means that the borrower can
   take their current mortgage to a new home at the same rate, etc . If the current mortgage is not enough
   to cover the purchase of the new home, the lender will often let you increase the mortgage and charge
   you current rates only on the portion being increased (called “blending” the rate) .

   Assumable means that, with the approval of the lender, the purchasers of a home may “take-over” the
   vendor’s mortgage . Allowing a prospective buyer to assume your mortgage when the rate is lower than
   the current market rates may increase the marketability of the property being sold .

e.	cMhc/genworth	PolIcIes	&	Procedures	
   E1. What Is CMhC’s RolE?
   Canada Mortgage and Housing Corporation is a crown corporation whose broad mandate
   includes programs to assist Canadians with housing matters . The most frequent contact
   most people will have with CMHC will be as a provider of mortgage insurance on high
   ratio mortgages .

   GENWORTH provides the same service and high ratio insurance as CMHC, however they are
   privately owned and operated .

   By law, financial institutions require that all mortgages with a loan to value ratio greater than
   80% be insured against default . CMHC provides mortgage loan insurance to approved
   lenders in the event that the home owner defaults on their mortgage . Depending on the
   situation, a lender may also request that a conventional mortgage be insured through CMHC .

   e2.	cMhc/genworth	fees	&	PreMIuMs	
   The following is a summary of the insurance premiums for different loan to value ratios:
           LTV Ratio              Purchase Premium                      Cash-Out Refinance
                                                                   The Lesser of Premium as % of
                                                                Total Loan Amount        Top Up Portion
          Up to 65 .%            0 .50% of the mortgage               0 .50%                  0 .50%
         65 .01 to 75%           0 .65% of the mortgage               0 .65%                  2 .25%
         75 .01 to 80%           1 .00% of the mortgage               1 .00%                  2 .75%
         80 .01 to 85%           1 .75% of the mortgage               1 .75%                  3 .50%
         85 .01 to 90%           2 .00% of the mortgage               2 .00%                  4 .25%
         90 .01 to 95%           2 .75% of the mortgage               2 .75%                  4 .25%
         90 .01 to 95%           2 .90% of the mortgage
          CMHC Flex Down

   * Please note that for extended amortizations, CMHC will add .20 for every 5 years beyond a
    25 year amortization. So, for a 35 year amortization, there is a .40 premium surcharge added.
    This premium surcharge applies no matter which high ratio insurance program you are
    applying under.

   In a refinance transaction, the premium payable is the lesser of a) the new loan amount
   multiplied by the full premium rate below, or b) the increase in loan amount (top-up amount)
   multiplied by the top-up premium rate in the table above . The insurance premium may be
   paid in full on closing or added to the mortgage amount . If added to the mortgage, interest
   is then paid on the insurance premium over the amortization of the mortgage . Since most
   buyers do not have the extra cash on closing, it is most common to add the premium to
   the mortgage .

e.	cMhc/genworth	PolIcIes	&	Procedures	
   e3.	extended	AMortIzAtIon	oPtIons		
   A premium surcharge of  .20 is added for every 5 years beyond 25 years, up to a maximum of
   35 years . So, to amortize your mortgage up to 35 years you would add  .40 to the insurance
   premium .

   E4. CMhC’s MultIplE uNIt RENtal pRoGRaMs
   This program is broken down into two categories — 1-2 Units or 3-4 Units . This means the
   number of CMHC insured mortgages owned or being acquired for rental properties . Eg . if |
   applicants have one CMHC insured rental property and are buying a second one for rental,
   they would qualify under the first category. If they already own two CMHC insured rental
   properties, and are acquiring a third, they would qualify under the second category .

    -  UniT RenTAL PROgRAm	 Up to 95% Financing for purchase or refinancing.

    -  UniT RenTAL PROgRAm		Up to 90% Financing for purchase or refinancing.
   •     Maximum amortization is 35 years .
   •     Not allowed for Self-Employed program . Applicants must be fully qualifying .
   •     Minimum beacon score requirement for a purchase of up to 95% financing, and with
         down payment from own resources is 600 .
   •     Minimum beacon score requirement for a refinance up to 95% is 650.
   •     Qualifying based on following formula:

                            PITH (all properties) + All Other Debt Obligations
                            less 80% of Gross Rental Income (All Properties)
                                  Gross Annual Household Income

   PITH = Principal, Interest, Taxes and Heat
                insurance Premiums                      Purchase        Premium on increase to
                                                                            Loan Amount
               Up to and including 65%                   1 .25%                   2 .75%
                    65 .01% to 75%                       1 .75%                   3 .00%
                    75 .01% to 80%                       2 .50%                   3 .75%
                    80 .01% to 85%                       3 .50%                   5 .00%
                    85 .01% to 90%                       4 .75%                   6 .25%
                   90 .01% to 95%
              Traditional Down Payment                   6 .50%                   8 .00%
            Non-Traditional Down Payment                 6 .75%                    N/A

   * Please note that for extended amortizations, CMHC will add .20 for every 5 years
       beyond a 25 year amortization. So, for a 35 year amortization, there is a .40 premium
       surcharge added. This premium surcharge applies no matter which high ratio
       insurance program you are applying under.
e.	cMhc/genworth	PolIcIes	&	Procedures	
   e5.	hIgh	rAtIo	fInAncIng	for	self	eMPloyed	APPlIcAnts
   There are lending programs available to assist applicants that are self-employed . CMHC and
   GENWORTH each have their own program . Financing is available up to 95% . Applicants
   must be up to date with tax filings, and showing no tax arrears. The reported income is not
   looked at for qualifying purposes . Applicants need good credit with a minimum credit bureau
   beacon score of 700 for 95% financing. In a refinance transaction, the premium payable
   is the lesser of a) the new loan amount multiplied by the full premium rate below, or b) the
   increase in loan amount (top-up amount) multiplied by the top-up premium rate in the table
   below .The premiums are higher, as follows:

                                                                  Cash-Out Refinance
                                                             The Lesser of Premium as % of

      LTV Ratio       Bureau Scores         Premium       Total Loan Amount       Top Up Portion
    65 .01% - 75%            600             1 .00%              1 .00%                2 .60%
    75 .01% - 80%            620             1 .64%              1 .64%                3 .85%
    80 .01% - 85%            620             2 .90%              2 .90%                5 .50%
    85 .01% - 90%            650             4 .75%              4 .75%                7 .00%
     90 .01 - 95%            700             6 .00%                 -                     -

   * Please note that for extended amortizations, CMHC will add .20 for every 5 years beyond
    a 25 year amortization. So, for a 35 year amortization, there is a .40 premium surcharge
    added. This premium surcharge applies no matter which high ratio insurance program you
    are applying under.

   Ideally, applicants need to be self-employed for at least 2 years, or have 2 years in the same
   type ofwork even if not the self-employed capacity . Down payments can nOT be gifted.

   e6.	cMhc	second	hoMe	lendIng	ProgrAM	

   CMHC will allow home owners to have 2 CMHC insured mortgage loans with them, one for
   their principal residence, and one for a 2nd home, or home occupied by a family member .
   Financing is available to 95% at the standard insurance premiums, as outlined on page 12 .
   The property can be anywhere in Canada and must be suitable for and available for, year
   round occupancy . Properties located on an island must have year-round bridge or ferry
   access . Time-share interests, life leases, and properties in rental pools are not eligible .
   Applicants must qualify without the use of rental income . Applicants under the Self-
   Employed program are also eligible to a maximum loan to value of 95% .

f.	other	governMent	IncentIves	
   f1.	usIng	your	rrsP	for	down	PAyMent	
   The guidelines are as follows:
   • You cannot have owned your principal residence in the last 5 years .
   • Each purchaser may withdraw up to $20,000 from their RRSP (i .e . two purchasers may use $20,000 each) .
   • You must make repayments to your RRSP of equal amounts over the next 15 years .
   • If the amount is not repaid in a year, that year’s amount will be taken into income and taxed .
   • It is acceptable to repay more than 1/15th of the funds per year .
   • If less than 1/15th is repaid in one year, the difference is taken into income for that year and taxed .
   • The home must be intended to be your principal residence .

   • The funds must be in your RRSP for at least 90 days prior to withdrawal .
   • The government website for more information is:
     http://www .cra-arc .gc .ca/tax/individuals/topics/rrsp/hbp/menu-e .html .

   f2.	ProPerty	trAnsfer	tAx	InforMAtIon	
   When buying a home in BC, there is usually a government charged property transfer tax. As a first time home
   buyer however, this can be waived if certain conditions are met . Here are a few of the basic conditions:
   • Must be a Canadian citizen, or a permanent resident as determined by Immigration Canada .
   • Purchase price cannot exceed $425,000 .
   • You must not have previously owned your principal residence, anywhere in the world .
   • You must have resided in BC for the period 12 months before the date of purchase, or you have filed
     2 income tax returns as a BC resident during the 6 years before the date of property registration .

   For complete details, please go to:
   www .rev .gov .bc .ca/individuals/Property_Taxes/Property_Transfer_Tax/brochures .htm .

g.	closIng	the	deAl	
   g1.	estIMAted	costs	

   A few days before closing, your lawyer will have you come into his or her office to sign all the
   mortgage documents. When they set up this appointment, they will give you the final figure
   of how much you should write your cheque for and to whom it should be payable (usually the
   lawyer or legal firm “in trust”). You will receive a Statement of Adjustments which will show
   you exactly how your funds are being disbursed .

   *Costs are estimated and will vary depending on each individual transaction and property.

h.	MortgAge	PAyMent	cAlculAtor	
   mortgage Payment Calculation Chart Per $,000 Of mortgage

   Example: $100,000 mortgage @ 5% amortized over 25 years = $5 .82 per $1,000, so,
   100 x 5 .82 = $582 per month .

   Interest Rate                                              Amortization Period
   (Compounded Semi-Annually)                                 (In Years)

   You can also visit our internet web site at:
   garibaldimortgage .com

   At this site you can calculate your mortgage amortization schedule and then print out the
   details of all your payments . You can also view the latest best rates that we have access to .

I.	non-resIdent	
   I1.	non-resIdent	lendIng	
   We frequently receive requests from non-residents of Canada looking for financing for the
   purchase of revenue or vacation property . While the general guidelines from most banks
   observe a maximum 65% loan to value policy, we do have lenders that will make exceptions
   to 75% depending on each application, and the type of real estate you are buying .

   Depending on your purchase price, the lender may reduce the loan to value ratio, as every
   bank has different formulas they follow on larger loan amounts . For example, a high value
   purchase in excess of $2,000,000 may have a maximum loan availability of 55% . As every
   client situation and property is different, we are able to obtain exceptions and provide
   financing over and above guidelines, on a case by case basis.

   You may hear terms like ‘payment hypothecation’ and ‘assignment of rents’ .

   Payment Hypothecation refers to a deposit equal to 3 -6 months’ worth of payments held
   for at least 1 year in a separate, interest-bearing vehicle . It provides additional security for the
   loan, and is more common when financing up to 75%. These funds are usually released after
   one year at the lender’s discretion, as long as the mortgage has been repaid as agreed .

   Assignment of Rents refers to a lender issued document registered on the title of your
   purchase at the time of mortgage registration . It entitles the lender to use rental income to
   make up any funds in arrears if the mortgage were ever to go into default . As long as the
   mortgage is in regular repayment, the lender has no cause to use the ‘assignment of rents’ .

   I2.	whIstler	condo	fInAncIng	
   In the Whistler area, condominiums are generally divided into 2 types: Phase I and Phase
   II . Phase I properties allow full year round use at the owner’s discretion, and when not in
   use, there is an expectation that the property be placed in a rental pool . Participation is not
   mandatory . Phase II properties allow the owners to use the condo 28 days in the summer and
   28 days in the winter, and when not in use it must be placed in the rental pool . Rental pool
   participation is mandatory .

   Financing is generally available to 65% . Rates and possible fees should be discussed
   wtih your mortgage broker, as the available financing and terms for these properties vary
   depending on where you are filing tax returns, and your overall qualifications as an applicant.

I.	non-resIdent	
   I3.	how	cAnAdIAn	MortgAges	worK

   The way fixed rate Canadian mortgages work is like this:

   They are closed interest rate contracts – closed for the term you select, ie one to 10 years .
   The maximum amortization available is 25 years . The penalty to break the interest rate
   contract prior to the maturity date is the GREATER of 3 months interest, or the IRD (interest
   rate differential) . The IRD is the bank’s loss of interest for the time remaining in the term . So
   if you take a 5 year fixed and pay it off after 3 years, either from your own resources, or by
   sale, the bank will calculate the IRD by comparing your rate, with the current rate for 2 years,
   and charge that on the balance to the end of the term . The estimate for 3 months interest is
   approximately 2 months worth of payments .

   Additionally worth noting is that in the Bank Act, the maximum penalty that can be charged
   after the 5th anniversary is 3 months’ interest – so this is applicable for terms longer than 5
   years .

   All of our lenders allow a prepayment percentage from 10 to 20%, based on the original
   amount borrowed . Some allow it only on the anniversary date, and some allow it
   cumulatively throughout the year .

   When any mortgage is up for renewal, you may pay off as much as you wish without penalty .
   The renewal process is very easy . As long as you are just renewing the balance, and not
   changing anything, you just choose a new term at whatever the prevailing interest rates are .
   There are no lawyers involved or re-qualifying procedures to go through . Please note, at
   the end of the term you are able to switch lenders if you are not getting a competitive offer
   - however by switching lenders, you will have to go through the re-qualifying process . Many
   of our clients contact us at renewal, and we assist you with either switching lenders, or
   negotiating a better rate from your existing .

   There is also variable, prime based financing available. The Canadian prime rate is reviewed
   every 6 weeks . Generally, with a closed variable rate mortgage, the penalty to pay off early is
   3 months’ interest . With an open variable rate mortgage, there are no penalties for early
   pay off .

J.	constructIon	MortgAge	guIde		
 J1. UNdErstaNdiNg thE CoNstrUCtioN FiNaNCiNg ProCEss

 Building your own home is an exciting and rewarding           deterMInIng	whAt	you	need	to	get	stArted
 project . We are here to help you understand the process
                                                               During the application process, you will need to
 of financing the construction of your new home so that
                                                               understand the initial costs that you will be responsible
 you can get started with confidence and proceed with
                                                               for .
 peace of mind .
 You may have some experience in obtaining mortgage            land
 financing but as you’ll see, construction financing is        To secure construction financing you are required to own
 a more detailed process, with several important mile-         the land, as the bank will need to register a first mort-
 stones that don’t take place when you buy an existing         gage on it .
 home .
 A substantial amount of your own funds are required up        The land you intend to build on needs to be fully ser-
 front . You are not “reimbursed” until the end, when the      viced . This includes site preparation and municipal
 dwelling is 100% complete .                                   services such as septic service, water connection, sewer
                                                               connection, hydro and gas service .
 now	is	the	time	to	plan
 It is never too early to plan . Read through the example      soft	costs
 sheets to ensure you have a clear understanding of            These are out-of-pocket expenses for services and
 how your advances work so that you request the right          charges you are likely to incur at the outset of, and
 mortgage amount .                                             throughout, the construction phases . Depending on
                                                               your plans and the location of your home, these will
 what	to	expect                                                likely include:
 When you build your home, there are more steps and            • Property taxes
 expenses than if you buy an existing home . In the sim-       • Municipal permits
 plest terms, a typical mortgage is advanced in one lump
                                                               • Fees for architects and engineers
 sum. Construction financing is different. At the bank, the
 total amount borrowed to complete a project is usually        • Fees for realtors and solicitors
 advanced in three stages within one year .                    • Fees for appraisals and inspections

                                                               Initial	building	costs
   Typical Mortgage                                            You are expected to finance the initial stage of
                                                               construction (approximately 15 to 20% of construction)
   You receive all of the money you borrowed at
                                                               with your own money . As every construction project is
   the time you obtain the property.                           different, this percentage is an estimate only for example
                                                               purposes .
   Construction Financing
   At the Bank, you pay the up-front costs, then               cost	overruns
   generally receive up to three advances.                     We recommend that you set aside an additional 15% of
                                                               the estimated construction costs to cover unexpected
   First advance at the Foundation stage.                      overruns .
   Second advance at the Lock-up stage.
   Third advance at the Completion stage.                      Interest	costs
                                                               You are required to make interest -only payments on all
                                                               amounts advanced until your regular principal and inter-
                                                               est payments begin .
                                                               In addition to the costs already outlined, you will also
                                                               need to budget for lien holdbacks .

J.	constructIon	MortgAge	guIde		
 Lien holdbacks                                               thE aPPliCatioN
 Different banks observe lien holdbacks in different ways .   Here’s what you should plan to bring to your first meeting
 They may also be subject to change . It is best to clarify
                                                              with a mortgage representative .
 your lender’s policy with your mortgage broker .

 Your solicitor may be required to hold back some of the      All information associated with the construction
 money advanced at each of the Foundation, Lock-up            • Construction contract, including costs
 and Completion stages of your construction project .
 This money is held in reserve in the event that a            • Construction plans or blueprints
 contractor or supplier claims a lien on your property . A    • Quotes for labour and material if you are acting as the
 lien is a claim by a contractor against the property to      general contractor
 secure repayment of unpaid construction costs .              • Site preparations, including municipal services for the
 The amount of your lien holdback and the number of           lot (e .g . excavation, septic service, water, sewer, hydro,
 days that your funds will be held in trust varies by         gas, etc .)
 province . The bank will instruct your solicitor to hold     • Evidence of ownership of the land and/or a copy of the
 back a percentage based on the chart below .                 purchase agreement with evidence of
 Ask your solicitor for details .                             available funds

                                                              Other requirements to help fulfill the application
                                                              or construction financing

      Province                    Percentage of               • Confirmation of required funds to complete the
                                    Holdback                  Foundation Stage
      Alberta                            10                   • Confirmation of income/employment
      British Columbia                   10                   • Name, address and telephone number of your solicitor

      Manitoba                          7 .5                  As we familiarize ourselves with the details of your
                                                              project, we can tell you what, if any, other documents
      New Brunswick                      20                   specific to your application may be required.
      Newfoundland                       10
                                                              The appraisal
      Nova Scotia                        10                   Determining the estimated value of your completed home .
      Ontario                            10                   The Lender will obtain an appraisal to estimate the value
      Prince Edward Island               20                   of your completed home, including the land .1 To arrive at
                                                              an estimate, your appraiser will review your construction
      Quebec                             15                   plans and blueprints to understand the type of home you
      Saskatchewan                       10                   are building .

                                                                For the purpose of the mortgage application, the value of
                                                              the completed project is the lesser of a) the cost to construct
                                                              including land value or b) the appraised value .

J.	constructIon	MortgAge	guIde		
 YoUr 1st advaNCE - thE FoUNdatioN stagE                   YoUr 2Nd advaNCE - thE loCK-UP stagE
 When you have completed the Foundation stage, we          The Lender will release your second advance to your
 will send an appraiser to your home to inspect the        solicitor . Once again, a lien holdback may be applied .
 property and confirm that the Foundation stage is
 complete .                                                The amount of your second advance is dependent on
                                                           the requested mortgage amount, the amount of the first
 Up to this point, you will have paid all expenses from    advance and the remaining cost to construct
 your own resources .                                      your home .

 At each stage, when you are ready for an advance, the     YoUr 3rd advaNCE - thE ComPlEtEd stagE
 bank will send out their appraiser to confirm that the    When you have completed your home, we will send an
 work is completed and what percentage of work is left     appraiser to your home to inspect the property .
 to complete .
                                                           When the appraiser has determined that your building is
 The lender will release your first advance of funds to    complete, the Lender will release the final advance of finds
 your solicitor, who may keep a percentage of it as a      to your solicitor . A lien holdback may be applied .
 lien holdback . The percentage varies by province .       Prior to releasing the final advance, your solicitor may
 At this point monthly interest-only payments will         request further documentation, which may include:
 commence .
 The amount of your first advance is determined by         • Well Water Potability Certificate (if applicable)
 a formula based on the total requested mortgage           • Flow Certificates and Septic Certificates (if applicable)
 amount and the remaining cost to construct
                                                           • Occupancy Permit
 your home .
                                                           • New Home Warranty Certificates (if applicable)

 Prior to releasing the first advance, your solicitor      Release of lien holdbacks
 will need -                                               All lien holdback will be release to you approximately 30-60
 • Builder’s all-risk insurance assigned to the Lender     days (depending on your province) after your project has
                                                           been completed, assuming there have been no lien claims
 • A survey showing the location of all buildings to       made against your property .
 be constructed
 • Confirmation that all necessary building permits        Anticipating mortgage interest and principal payments
 are in place                                              By the time your reach the Completed stage, most of your
                                                           mortgage amount will have been advanced to you through
                                                           your solicitor . You will be required to start making regular
                                                           mortgage interest and principal payments shortly after
   imPortaNt NotE                                          receiving your third advance .
   It is important that you request the right mortgage
   amount . Review the examples found in the guide
   on pages 25 - 28 prior to applying for a mortgage
   so that you understand how the advance
   schedule works .

J.	constructIon	MortgAge	guIde		
 J2.	constructIon	fInAncIng	exAMPle	sheets
 This example illustrates why it is so important to to apply for the maximum amount of financing you can obtain,
 rather than just the minimum budgeted amount. The higher financing allows for maximum flexibility during your
 advances which is important as unforeseen costs, due to materials, scheduling etc ., can arise as construction
 progresses . Keep in mind that your final advance is not released until the project is completed.

                       The land is owned free and clear of any financing, and the borrower is applying
                       only for the minimum budgeted amount.

                                                              Funds Needed

                       Land Value:       $500,000                $300,000        Build Cost
                       Build Cost:        300,000                  45,000        Overruns
                       total value:      $800,000                  15,000        GST on Build Cost
                                                                    5,000        Estimated Legal Costs
                                                                   20,000        Soft Cost
                                                                 $385,000        Financing applied For

        1 . You spend approximately $50,000 to establish the Foundation .

        2 . The bank sends out their appraiser .

        3 . The appraiser determines there is $250,000 required to complete the construction .

        4. The first draw is calculated as follows:

                                                          Approved Financing                 $385,000
                                             less amount required to complete              - $250,000
                ST ADVAnCe released through Lawyer to use through to
                                                next stage - Lock-up
                                                                                 =          $135,000

        5. $135,000 spent and the bank’s appraiser is called out. The appraiser confirms there is $115,000
           worth of work required to complete, calculated as follows:

                                                                    Build Cost               $300,000
                                                               less Foundation               - $50,000
                                                              less 1st Advance             - $135,000
                                               Amount required to complete       =           $115,000

J.	constructIon	MortgAge	guIde		
   J2.	constructIon	fInAncIng	exAMPle	sheets

    6. The 2nd Advance is calculated as follows:

                                                        Approved Financing                 $385,000
                                                         less First Advance              - $135,000
                                                                              =            $250,000
                                            less Work required to complete               - $115,000
                                                      2nd advaNCE available   =            $135,000

    7. The $135,000 is used towards the completion of the structure .

    8.   At this point, you will have spent $270,000 in advances, leaving approximately $30,000 needed in
         available credit to complete. This figure could be higher depending on how much in overruns you
         have incurred, and GST .
         At this stage, the funding to complete construction will have to come from outside resources
         and credit, as the final advance from the bank is not paid until completion. it is very important
         to plan for this. Will you be able to get funding from other resources at this stage?

    9. The dwelling is 100% finished and the bank’s appraiser is sent out once again to confirm if there is
       any work required to complete. If the appraiser confirms completion of the work, the bank releases
       the balance of the construction mortgage funds - $115,000 ($385,000 financing - $270,000 advances
       paid = $115,000) which at that point reimburses you to pay down any credit lines used .

        This alternative scenario shows why it is important to try to obtain a higher than needed construction
        mortgage loan at the very beginning to provide flexibility in the mortgage draws.

         If $485,000 had been approved at the beginning, then outside credit lines would not have been
         needed to complete the structure:

                                                   First Advance
                                                        $485,000 Approved
              $50,000 Spent on Foundation                250,000
              $250,000 Required to Complete             $,000   Available for Advance

                                                   Second Advance

              $235,000 Spent and Appraiser              $485,000       Approved
              confirms $15,000 required to              - 250,000      less First Advance
              complete                                    - 15,000     less Amount to complete
                                                        $,000       Available for Advance

              $470,000 has been made available in advances to complete structure completely, cover
              overruns, GST and legal costs . In this scenario, there is no need to go to outside resources
              for funding to reach the completion stage .

	   J.	constructIon	MortgAge	guIde		
      J2.	constructIon	fInAncIng	exAMPle	sheets
      This example shows the construction mortgage process when there is also a lot loan involved .

        EXAMPLE 2          There is a lot loan registered against the land.

                                                                       Funds Needed

                           Lot Loan         $250,000                  $250,000     to Pay off Lot
                                                                       300,000     Build Cost
                           Land Value        500,000                    45,000     Overruns Estimate
                           Build Cost        $300,00                    15,000     GST
                           Total Value:     $00,000                     5,000     Legals
                                                                        20,000     Soft Costs
                                                                      $,000     Financing Applied For

       1. You spend approximately $50,000 to establish the Foundation .

       2. The bank sends out their appraiser .

       3. The appraiser determines there is $250,000 required to complete the construction .

       4. The st Advance is calculated as follows:

                                                        Approved Financing              $635,000
                                                      Required to Complete            - $250,000
              st Advance released through Lawyer to use through to next                $385,000
                              stage - Lock-up AND to pay off lot financing

                                                   Lot Loan mus be paid off            - 250,000
                           Amount remaining to spend on construction                   $135,000

       5. $135,000 has been spent and the bank’s appraiser is called out. The appraiser confirms there is
          $115,000 worth of work required to complete, calculated as follows:

                                                                 Build Cost             $300,000
                                                           Foundation Cost              - $50,000
                                                              First Advance           - $135,000
                                                 Work required to complete    =         $115,000

	   J.	constructIon	MortgAge	guIde		
      J2.	constructIon	fInAncIng	exAMPle	sheets
       6. The nd Advance is calculated as follows:

                                                                     Approved               $635,000
                                                                    First Draw            - $385,000
                                                   Work required to complete              - $115,000
                                                      nd Advance Available                 $135,000

       7. The $135,000 is used towards the completion of the structure . Once again, there will have been
          $270,000 used towards the build, with approximately $30,000 plus GST plus overruns to be covered
          from an outside source at this point in time .

          In this example, the $635,000 applied for is 79.3% financing based on the end value cost
          (ie . $635,000/ $800,000 = 79 .3% loan to value ratio) .

          In this case, to apply for higher financing at the beginning would provide you with flexibility during the
          advances, BUT would also incur CmHC mortgage insurance costs .

          Remember that any mortgage with a loan-to-value ratio of 80% or higher will incur CMHC mortgage
          insurance costs. Your decision in this case as to how much financing to apply for at the beginning
          would be determined by th availability of outside lines of credit and/or family assistance and the cost
          of the CMHC premium . (See Section E for insurance premium tables) .

       9. The dwelling is 100% finished and the bank’s appraiser is sent out once again to confirm if there is
          any work required to complete. If the appraiser confirms completion of the work, the bank releases
          the balance of the construction mortgage funds, which at that point reimburses you to pay down any
          credit lines used .

K.	glossAry	of	MortgAge	&	reAl	estAte	terMs	
    ACCRUeD inTeReST                                       ASSUmPTiOn OF mORTgAge
    Interest which has accumulated unpaid since            The purchaser of property assumes the liability
    last payment date .                                    for an existing mortgage against a property
                                                           and becomes liable for timely payment of the
    AmORTizATiOn                                           mortgage . This action might occur with or without
    The gradual retirement of a debt by means of partial   approval of the existing mortgagee depending on
    payments of the principal at regular intervals .       the terms of the existing mortgage .

    AmORTizATiOn PeRiOD                                    BLAnKeT mORTgAge
    A time of arrangement for paying off a mortgage        A single document which is registered covering
    by equal installments or periodic constant             more than one title to property .
    payments . Repayments of principal and interest
    in “blended” amounts . Fully amortized means           BLenDeD mORTgAge
    complete repayment without a “balloon”                 Combining the amount owing on an existing
    payment at the end of the term . Can be as short       mortgage with additional mortgage money for
    as 5 years or as long as 40 years .                    the purpose of buying another property . The
                                                           interest rate changes to one that combines the
    AmORTizATiOn SCHeDULe                                  rate on the old loan with the rate in effect at the
    The amortization schedule shows monthly                time you add additional financing.
    installments of principal and interest and how
    much of the payment is allocated to each . It also     BLenDeD PAymenTS
    shows the unpaid principal balance .                   The method of repayment where periodic
                                                           payments of principal and interest are made in
    APPRAiSeD VALUe                                        such a way that the payments remain constant
    A dollar amount assigned to taxable property, by       in amount, although the portions attributed to
    the assessor, for the purpose of equalizing the        principal and interest vary with each payment .
    burden of taxation .
                                                           BRiDge FinAnCing
    ASSeTS                                                 A special short-term loan needed to cover
    What the borrower owns . Liquid assets are             (bridge) the gap in time between completing
    those that can be quickly converted to cash .          the purchase of one property and finalizing
                                                           arrangements to pay for it . This is often the
    ASSignmenT OF mORTgAge                                 result of mismatched closing dates .
    The assigning of a mortgagee’s interest in the
    mortgage to a new mortgagee . The legal sale           CARRying COSTS
    of the mortgage with or without an agreement           The actual cost of living in and maintaining
    to repurchase .                                        property, including mortgage payments,
                                                           property tax, heating and repairs .
    ASSignmenT OF RenTS
    Refers to a lender issued document registered          CLOSeD mORTgAge
    on the title of your purchase at the time of           The restriction or denial of repayment rights until
    mortgage registration . It entitles the lender to      the maturity of the mortgage .
    use rental income to make up any funds in
    arrears if the mortgage were ever to go into           CLOSing DATe
    default . As long as the mortgage is in regular        The date on which the sale of a property
    repayment, the lender has no cause to use the          becomes final and the new owner takes
    ‘assignment of rents’ .                                possession .

K.	glossAry	of	MortgAge	&	reAl	estAte	terMs	
    CmHC                                                COmPOUnD inTeReST
    Canada Mortgage and Housing Corporation,            Interest charged not only to the principal sum
    a Crown Corporation which administers the           but also on interest amounts charged in a
    National Housing Act .                              preceding period .

    CO-OPeRATiVe                                        COnDOminiUm
    The ownership of a separate amount of space in      The ownership of a separate amount of space in
    a multiple dwelling or other multiple-occupancy     a multiple dwelling or other multiple-occupancy
    building with proportioned tenancy in common        building with proportioned tenancy in common
    ownership of common elements . Used jointly         ownership of common elements used jointly
    with other owners however, the owner does not       with other owners .
    own his/her specific unit but he/she becomes
    a shareholder of the corporation which owns         COnTRACT
    all the real property and occupies by way of a      An agreement between two or more parties
    tenancy agreement subject to a shareholders         given receipt of lawful consideration to do or
    agreement administered by an elected board of       refrain from doing some act .
    directors .
                                                        COnVenTiOnAL mORTgAge
    CO-OWneRSHiP                                        A first mortgage, outside the conditions of
    Co-ownership occurs when the ownership of           NHA (the National Housing Act), granted by an
    the whole property is divided (not necessarily      institutional lender such as a bank, mortgage,
    on a pro-rated basis) between two or more           loan or trust company wherein the amount of
    persons . Usually there is a written agreement      the loan does not exceed 80% of the appraised
    between the co-owners in which the rights of        value of the property .
    each co-owner is described . Each co-owner
    may sell his/her right of ownership or dispose of   COnVeRTiBLe mORTgAge
    it as he/she wishes .                               A short term mortgage, usually 6 or 12 months,
                                                        allowing the borrower to switch into a longer
    COLLATeRAL mORTgAge                                 term at anytime without penalty . There are
    A loan backed by a promissory note and the          several different variations to the convertible
    security of a mortgage on a property . The money    mortgage .
    borrowed may be used for another purpose,
    such as home renovations or a vacation .            DeBT SeRViCe
                                                        The amount of principal and interest repayments
    COmmiTmenT                                          made under a mortgage on a periodic basis .
    A notice from a mortgage lender to a                If payments are equal they are “constant
    prospective borrower that the lender will           payments”, if amounts vary they are known as
    advance mortgage funds in a specified amount        “variable payments” .
    under certain conditions .
    COmmiTmenT Fee                                      An instrument in writing, duly executed and
    This fee is charged by a lender for keeping         delivered, that conveys title or an interest in real
    an agreed amount of funds available to the          property .
    borrower for a specified period of time.
                                                        Failure to fulfil an obligation.

K.	glossAry	of	MortgAge	&	reAl	estAte	terMs	
    DeFAULT nOTe                                         FLOATing RATe OF inTeReST
    Payment is made on demand, usually within a          Rate of interest which fluctuates a certain
    few days notice to the borrower .                    number of percentage points above or below
                                                         prime lending rates .
    A sum of money (in the form of cash) required        FOReCLOSURe
    to be paid with an offer to purchase as a symbol     Remedial court action taken by a mortgagee when
    of the purchaser’s commitment . If the offer is      default occurs on a mortgage, to cause forfeiture
    accepted, the deposit is applied to the down         of the equity of redemption of the mortgagor .
    payment . If the offer is later turned down by the
    buyer, the deposit may or may not be returned .      FReeHOLD
                                                         The ownership of a tract of land on which the
    DiSCHARge OF mORTgAge                                building(s) are located . The most common type
    A document executed by the mortgagee, and            of ownership of real estate .
    given to the mortgagor when a mortgage loan
    has been repaid in full before, at, or after the     gROSS DeBT SeRViCe RATiO (gDS)
    maturity date .                                      The annual charges for principal, interest
                                                         and taxes as a function of gross income of
    DOWn PAymenT                                         the mortgagor .
    The amount of money (in the form of cash) put
    forward by the buyer toward the purchase price       gROSS inCOme
    of a home .                                          The scheduled income from the operation
                                                         of the business of the management of the
    eFFeCTiVe inTeReST RATe                              property, customarily stated on an annual
    The actual interest rate on investment where         basis . Also refers to the total personal income
    a debt or loan was bought at a discount or at        (from all sources) of an individual, before taxes
    a premium .                                          and other deductions .

    eqUiTy                                               gUARAnTOR
    The remaining interest an owner of real property     A third party person without interest in the
    has in its total value allowing for encumbrances     property who agrees to assume responsibility for
    and creditors’ claims .                              a debt in the event of default by the mortgagor .

    FiRST mORTgAge                                       HigH RATiO mORTgAge
    A mortgage on property creating a prior claim        A mortgage loan that exceeds the normal limit
    over any subsequent mortgages or charges             of a conventional first mortgage, in regard to the
    and usually conveying the legal estate to the        ratio of the loan amount to the property’s lending
    mortgagee . Upon foreclosure of the mortgage,        value; the higher loan amount is made possible
    the first mortgagee must be fully satisfied out of   by a mortgage insurance plan . e .g . CMHC .
    the proceeds before any subsequent claims .
    FixeD-RATe mORTgAge                                  An amount of money retained by a construction
    This is the usual form of mortgage where             lender or owner until satisfactory completion of
    interest rate remains the same during the entire     the work performed by a contractor .
    life of the loan .

K.	glossAry	of	MortgAge	&	reAl	estAte	terMs	
    inCOme/exPenSe RATiO                                 LeTTeR OF inTenT
    Ratio of operation expenses to gross income          Similar to a commitment letter where a lender
    and expressed as a percentage (also known as         issues a letter to a borrower outlining their intent
    operating ratio) .                                   to lend them money for a specific purpose and
                                                         under what conditions that money will be loaned .
    “Annual” profit on a loan of money. The price paid   LiABiLiTieS
    to rent money . A function of the rate of interest   What the borrower owes .
    over a period of time on a specific sum of money.
    inTeReST ADjUSTmenT DATe (iAD)                       The lender’s legal claim to the borrower’s property .
    The date on which the mortgage really begins,
    usually the first of the month. The borrower is      Line OF CReDiT
    required to pay interest on the loan between the     A maximum credit limit allowed by a lender to a
    date of receiving the funds and the IAD before       borrower, as long as the borrower maintains an
    regular mortgage payments start .                    acceptable balance on account or has a good
                                                         credit rating . The credit line will vary from time to
    inTeReST OnLy LOAn                                   time according to the changing circumstances
    Borrower pays back interest only on the loan         of the borrower or the lender .
    and there is no amortization until later or until
    the end of the term . This may occur when a          LOAn COVeRAge
    purchaser wishes to resell property after a          The ratio of net operating income to mortgage
    short period or if he wishes to build up enough      debt service; in general, loan coverage of 1 .2 is
    income from the property before amortization .       considered adequate .

    jOinT TenAnCy                                        LOAn Fee
    Ownership of land by two or more persons             A charge for making a loan in addition to the
    whereby, on the death of one, the survivor or        interest charged to the borrower .
    survivors take the whole estate .
                                                         LOAn TO VALUe RATiO
    LeASeHOLD                                            The advance ratio of the principal amount of the
    A person has use of the property for a limited       mortgage as a function of the lending value of
    time . This person can rent the building or own      the property .
    the building and rent the land on which the
    building sits .                                      mATURiTy DATe
                                                         The last day of the term of the mortgage
    LeASeHOLD mORTgAge                                   agreement . The mortgage must be paid in full or
    A mortgage for the purchase of a home or             the agreement renewed by the maturity date .
    improvements to a home where the building is
    on land that is leased or rented .                   mORTgAge
                                                         A conveyance of property to a creditor, as
    LenDing VALUe                                        security for payment of a debt . Such security
    An independent appraiser’s value interpreted by      is redeemable or recoverable on the payment
    the lender as to the worth of a property in the      or discharge of the debt at a specified date.
    current market given a reasonable time period to     More recently referred to as a Charge in the new
    sell the property .                                  Polaris registry system . An
                                                         encumbrance registered on
                                                         the title of the lands .
K.	glossAry	of	MortgAge	&	reAl	estAte	terMs	
    mORTgAge inSURAnCe PRemiUm                           PAymenT HyPOTHeCATiOn
    A premium which is charged as a percentage           Refers to a deposit equal to 3 -6 months’
    of the mortgage . The mortgage insurance             worth of payments held for at least 1 year in a
    insures the lender against loss in case of           separate, interest-bearing vehicle . They provide
    default by the borrower .                            additional security for the loan, and are more
                                                         common when financing up to 75%. These
    mORTgAge LiFe inSURAnCe                              funds are usually released after one year at the
    A form of reducing term insurance                    lender’s discretion, as long as the mortgage has
    recommended for the borrower . In the event          been repaid as agreed .
    of the death of the borrower or one of the co-
    borrowers, the insurance pays the balance            P.i.
    owing on the mortgage . The intent is to protect     Principal and interest due on a mortgage .
    survivors from losing their home .
    mORTgAgee                                            Principal, interest and property taxes due on a
    The one to whom property is conveyed . (The          mortgage .
    lender) . The holder of the mortgage .
    mORTgAgOR                                            Principal, interest, taxes, and heating costs due
    The one who makes the payments . The owner           on a mortgage . These payments are used to
    of the property . (The borrower) .                   calculate the GDS and TDS of a borrower .

    nATiOnAL HOUSing ACT (nHA) LOAn                      PenALTy
    A mortgage backed (insured) to a certain             A sum of money paid to a lender for the privilege
    maximum by CMHC or an approved private               of prepaying a mortgage in part or in full,
    insurer .                                            outside the privileges set out in the terms of the
                                                         mortgage .
    neT RATe OF inTeReST
    The interest rate received by a mortgage lender      PORTABLe mORTgAge
    net of the servicing fee deducted by a loan          Upon the consent of the lender, the mortgagor
    correspondent, etc .                                 may transfer the balance of their existing
                                                         mortgage to a new property being mortgaged .
    nOminAL RATe
    The quoted interest rate for a mortgage .            POWeR OF SALe
                                                         The right of a mortgagee to force sale of the
    OFFeR TO PURCHASe                                    property without judicial proceedings should
    A formal, legal agreement that offers a certain      default occur .
    price for a specified property. The offer may be
    a firm (no conditions attached) or conditional       PRe-APPROVeD mORTgAge
    (certain conditions must be fulfilled).              Preliminary approval by the lender of the
                                                         borrower’s application for a mortgage to certain
    OPen mORTgAge                                        maximum amount and rate . Usually conditional
    A way of registering a mortgage which allows         upon the property being purchased meeting the
    the mortgagor to make extra payments, make           lender’s criteria .
    principal repayments, or pay the loan off in full
    at anytime without penalty .                         PRe-AUTHORizeD CHeqUe (PAC)
                                                         see Pre-Authorized Payment .

K.	glossAry	of	MortgAge	&	reAl	estAte	terMs	
    PRe-AUTHORizeD PAymenT (PAP)                      RATe (inTeReST)
    This method of making mortgage payments           The return the lender receives for loaning the
    allows the lender to deduct the agreed upon       borrower the money for the mortgage .
    mortgage (tax & insurance, if applicable)
    payment directly from the borrower’s chequing     ReDemPTiOn
    account .                                         The buying back of a mortgage estate by
                                                      payment of the sum due on the mortgage .
    PRePAymenT CHARge
    A fee charged by the lender when the borrower     ReFinAnCe
    prepays all or part of a mortgage more quickly    To pay in full and discharge a mortgage and any
    than stated in the mortgage agreement . The fee   other registered encumbrances and arrange for a
    is charged to compensate the lender for loss of   new mortgage with the same or a different lender .
    revenue .
    PRePAymenT OPTiOnS                                To change the terms and conditions of a mortgage
    The clause in the mortgage agreement              agreement prior to maturity . Renegotiation occurs
    that specifies when, how much and how             with the lender who currently holds the mortgage .
    prepayments of the mortgage principal (above
    and beyond the regular mortgage payments)         ReneWAL AgReemenT
    can be made by the borrower .                     An agreement whereby the lender may agree
                                                      to extend the term of the loan, but possibly on
    PRime RATe                                        revised terms as to principal repayments and
    The rate charged by banks to their most credit-   interest rate .
    worthy borrowers .
                                                      ReSeRVe FUnD
    PRinCiPAL                                         A fund set up by a condominium corporation for
    The amount of money borrowed . Could be part      major repairs and replacement of such items as
    of the repayment plan that lowers this original   the roof, elevators, plumbing, heating systems,
    amount .                                          etc . All condo corporations, by law, require a
                                                      reserve fund .
    PRiORiTy OF mORTgAgeS (i.e. FiRST,
    SeCOnD, THiRD)                                    ROLL-OVeR mORTgAge
    Dates of registration by number and date in the   A mortgage loan where the interest rate is
    local Registry Office and/or Land Titles, then    established for a specific term. At the end of this
    given to the mortgagee . First mortgages have     term the mortgage is said to “roll over” and the
    priority over second mortgages; and so on .       borrower and lender may agree to extend the loan .
    Priority refers to the mortgagee’s claim to the   If satisfactory terms cannot be agreed upon, the
    property should payments go into default .        lender is entitled to be repaid in full . In this case,
                                                      the borrower may seek alternative financing.
    PROmiSSORy nOTe
    An unconditioned note or written promise by       SeCOnD mORTgAge
    the promisor to pay a sum of money to the         A mortgage placed on real property which
    payee on demand or at a fixed or determinable     is already encumbered with one mortgage .
    future date .                                     Determination of first, second, third, etc. mortgage
                                                      is by priority of registration (time and date) .

K.	glossAry	of	MortgAge	&	reAl	estAte	terMs	
    SeCURiTy                                            UnDeRWRiTeR (mORTgAge)
    Property offered as backing for a loan . In         A person employed by a mortgage lender
    the case of mortgages, the property being           or mortgage broker who assesses loan
    purchased with the loan usually forms the           applications based upon the following: quality
    security for the loan .                             of the real property, credit worthiness and ability
                                                        to pay of the applicant and guidelines of the
    SHeLTeR PAymenT RATiO                               lender with regard to ratio of mortgage loan to
    Gross debt service plus annual heat costs as a      value of property .
    function of the gross income of the mortgagor .
                                                        VARiABLe inTeReST mORTgAge
    SURVey                                              A loan where the interest rate may vary during
    The accurate mathematical measurements of           the term of the mortgage . The variance is
    land and buildings thereon made with the aid of     usually tied to some specific factor such as
    instruments .                                       prime bank rate or the guaranteed investment
                                                        certificate rate for a designated lender.
    TenAnCy in COmmOn
    Ownership of land by two or more persons:           VenDOR TAKe BACK mORTgAge
    unlike joint tenancy in that the interest of the    A mortgage which a vendor of real property
    deceased does not pass to the survivor, but is      takes from the purchaser usually as part
    treated as an asset of the deceased’s estate .      payment of the purchase price for that property .
                                                        A private first or second mortgage that the
    TeRm OF LOAn                                        vendor lends to the purchaser/borrower .
    The actual length of time for which the money
    is borrowed . Anywhere from one month to 25         zOning
    years . The period for which the mortgage is        The public regulation of the character and intensity
    registered, in months .                             of the use of real estate . This is accomplished by
                                                        the establishment of districts in each of which
    TOTAL DeBT SeRViCe RATiO (TDS)                      uniform holding restrictions related to use, height,
    Gross debt service plus payments on other           area, bulk and density of population are imposed
    debts such as bank loans, finance company           upon the private property .
    loans, credit card payments, alimony, etc . as a
    function of the gross income of the borrower .

    To convey from one person or institution to
    another .

    Assignment of a mortgage under the Land Titles
    System .





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