• The payments in a fixed rate mortgage are only fixed for the term of the

mortgage (not the amortization). At the end of the term, the rate and payment
will most likely change depending on current conditions, what the lender is
offering and what new term the borrower now wants.

• Payment frequency has nothing to do with whether a mortgage is a fixed rate or

a variable rate. A financial institution will generally offer weekly, bi-weekly,
semi-monthly or monthly payments to a borrower irrespective of whether they
have chosen to take a variable rate or fixed rate mortgages.

• Longer term mortgages are popular when rates are expected to trend upwards.

• Unless payments are changed, a rise in rates will increase the amortization
period for a variable rate mortgage.

•
A credit score is a standardized formula used by credit reporting bureaus, based
on credit report information.
The opposite is in fact correct – the higher the score, the lower the risk to the
lender.
A lender's decision will be based on many factors e.g. the type of property,
borrower's equity, job stability, customer relationship and of course the credit
score.
The borrower's equity does not affect the credit score, but it is of course one of the
considerations that a lender's decision is based upon.

•
This exemption is very limited, but does also extend to providing information
about a lender to a borrower.
•
Lawyers acting in their professional capacity can be involved in dealing and
trading in mortgages, but they certainly cannot promote or advertise their dealing
and trading in mortgages.
•
A private lender needs to be licensed. Of course a private lender could use the
services of a licensed mortgage broker to facilitate their dealing and trading in
mortgages.

• This is a common law right and is not an implied covenant.

• This is not an implied covenant. This statement is referring to a third party being
able to assume a mortgage. In reality, a mortgage document usually requires that
the mortgagee has to approve the assumption.
•
If the mortgagor misses even a single payment, the mortgagee technically is
allowed to demand that the mortgagor immediately pay back the whole mortgage.
•
While a mortgagee may agree to postpone his/her mortgage priority (i.e.
preventing a second mortgage from becoming a first mortgage when the original
first mortgage expires), this is not an implied covenant.

Under the Land Registration Reform Act, mortgages are known as charges.
While the public, salespeople and corporate institutions still make use of the word
“mortgage”, the word “charge” is to be found in the Registry offices.

• In the technical sense, the words “legal mortgage” are no longer relevant as it
signifies a transfer of title to the mortgagee. While lenders may say they are
placing a mortgage on your property, in reality, they are putting a charge on the
property i.e. the charge merely identifies the debt and there is no transfer of title.

• A charge is the modern name for a mortgage, and the chargee would be the lender
and the chargor would be the borrower.
•
Given that legal mortgages transferred title to the mortgagee, only a legal
mortgage could have been a 1st mortgage (i.e. a borrower could only transfer title
once). Subsequent mortgages (e.g. 2nd or 3rd) would have been equitable
mortgages since there would have been no transfer of title (interest) and the
mortgagee would have been relying on the equity in the mortgage. Of course
legal and equitable mortgages have now been replaced by the concept of a charge.

•
Foreclosure is a process that requires court action. With foreclosure, the
mortgagee does not have to pay any surplus monies over to the mortgagor.

• It is called a judicial sale precisely because of the court involvement in the sale.
A judicial sale may result in a lower selling price given that the sale is typically
done through an auction.
•
In a Quit Claim deed, the mortgagor relinquishes title to the mortgagee without
the need for court action. In accepting a Quit Claim Deed, the mortgagee usually
agrees to take no further action against the mortgagor i.e. cannot also sue for
payment.

• The benefit of a contractual power of sale is that it does not require judicial
(court) proceedings. On the other hand, excess funds from the sale of the
property, are returned to the mortgagor.
• The first step for most lenders is to communicate with the mortgagor to try to
resolve the issues surrounding the default. It is legal action that can lead to a
costly dispute.

• Default can occur for a number of reasons e.g. non payment of taxes, non
payment of condo fees, non payment of the required insurance.

• A contractual power of sale does not require court action as there is a clause in the
mortgage contract that gives the mortgagee (lender) the right under certain
situations to sell the property without court authorization.

• The mortgagee has the right to take action for possession immediately upon
default – no time limits are presently included in the Mortgages Act or in the vast
majority of mortgage documents.

• When large amounts of money are involved, an underwriter needs assurances that
the business (income property) has a proven track record, well designed strategies
and solid management expertise. A personal covenant is in reality a fall back
position for the lender (e.g. recovering money if the business should fail).
•
The value of an income producing property is estimated by dividing the net
operating income by a market derived capitalization rate. Lenders may
manipulate the cap rate for their own purposes when dealing with lending value.
•
An established resale property will have financial statements and they are
important to underwriters as it tells them about the performance of the business.
Financial statements may not be available for new construction (as opposed to
resale) and as a result underwriters would tend to want to receive letters of
commitment from prospective tenants as a way of trying to gauge how the
business (property) will perform.
•
When large amounts of money are involved, an underwriter needs assurances that
the business (income property) has a proven track record, well designed strategies
and solid management expertise. A personal covenant is in reality a fall back
position for the lender (e.g. recovering money if the business should fail).

• The mortgagor may have to pay back a portion of any cash back received at the
beginning of the mortgage term. The repayment often follows the following
formula i.e. Cash Back Received X Remaining Term of Mortgage ÷ Original
Mortgage Term e.g. $3,000 X 24 ÷ 50 = $1,440 cash back repayment included in
penalty.
Subject to certain exceptions, the Interest Act and Mortgages Act have provisions
that provide that only a 3 month penalty can be levied on mortgages which have
been in existence for more that 5 years (i.e. the term of the mortgage is more tha 5
years and more than 5 years have passed).
•
If the interest rate of the mortgage is lower than current rates then there would be
no interest differential penalty since the lender could get more now for the
mortgage amount than when the mortgage was negotiated. Repaying the
mortgage may actually be advantageous for the lender.
•
Lenders very often will not lend at their posted rate. They wll often give a
discount to borrowers. Therefore the lender needs to be compensated for the
difference between what rate they are getting for the mortgage and what rate they
will most likely get for the particular mortgage in the current market.

• A bridge loan is in fact interim or temporary financing. In retail (as opposed to

commercial) lending it is typically seen when a buyer's down payment for a
purchase is coming from the sale of that buyer's existing home, but that home has
not yet sold or the closing of the sale is after the closing of the purchase.
•
A blanket mortgage is a single mortgage registered against two or more properties
allowing the lender to have recourse against all properties should default occur. It
is done when there may not be sufficient equity on just one property for the
financial institution to lend the required money.
•
A collateral mortgage is a loan backed by a promissory note and then further
secured by means of a mortgage on a property. It might be obtained for many
reasons (other than for the purchase of the property being mortgaged) e.g. buying
a boat, renovating a home.
•
While in a reverse mortgage, money is advanced to a homeowner who retains
possession of the property, the homeowner also retains title to the property. No
repayment of the reverse mortgage or interest takes place until a specified time in
the future: when the homeowner sells, when the homeowner moves permanently,
when a preset period (perhaps five or ten years), ends, or when the homeowner
dies.

• Net income is gross earnings less allowable expenses. The lender is looking for
what the borrower will actually receive from his/her business (pre tax).

• Bonusses and overtime may well be included for income purposes depending on
the history of overtime bonuses/overtime and their likelihood of continuing.

• Income tax refunds and tax credits are generally excluded.

• When a self employed individual's income has been declining, lenders will
generally use the lowest yearly income received during the period being looked at
(generally the last 2 or 3 years).
• For self employed commission salespeople, the lender would generally average
their earnings over the past 2 to 3 years. For small owner occupied buildings,
typically 50% of the rental income is included in the borrower's income.

• The income that is used is actually net income (gross commissions less allowable
expenses). Typically 50% of the rental income would be added to the borrower's
net income.

• It is 50% of the current rental income and the rent is verified by leasing
documents. For self employed commission salespeople, the lender would
generally average their earnings over the past 2 to 3 years.

• While the first part of the statement is true, for small owner occupied buildings,
typically 50% of the rental income is included in the borrower's income.

• The purpose of the DSCR (Debt Service Coverage Ratio is to ensure that a rental
property has sufficient income to handle the debt payments. This does not apply
to an owner occupied property where it is the buyer's/owner's income that is
looked at using GDS and TDS ratios.
The DSCR is calculated by dividing the net income of the property by the annual
debt servicing of that property.

• Lenders would want the DSCR to be in the positive range (generally between 1.2
and 1.4). If it is less than one that means that the debt servicing is greater than the
net income which would create a problem for repayments of debt.

• The DSCR is used by loan underwriters to establish whether or not the income
from a rental property is capable of handling the debt payments.

• Code of Ethics Section 18.4 only requires that written disclosure be given to client
(who in this instance is the buyer).
•
While providing conscientious and competent service is a requirement of REBBA
,2002, written disclosure is required when a direct or indirect financial benefit is
going to be received by a salesperson.
•

While the referral fee must be paid to ABC Realty Inc., Code of Ethics Section
18.4 only requires that written disclosure be given to client (who in this instance
is the buyer).

• Mortgage priority is established based on the date/time of registration and not on

the date of signing
•
Property taxes, regardless of when they become due for payment, always take
priority over registered mortgages
•
Judgment executions only have priority over a registered mortgage if the proper
execution of that judgment (i.e. it is received and recorded) takes place prior to
the mortgage registration. That is why a mortgagee's lawyer will always search
for judgment executions before registering a mortgage.
•
Common expenses is one of the claims that would take precedence over a
mortgage regardless of when the lien is registered

• There is no statutory requirement for a formal appraisal, but the prudent

mortgagee will want to obtain appraisals to avoid the possibility of litigation by
the mortgagor on the grounds that the property was undersold.
•
The mortgagee in effect becomes the landlord of the tenanted property and the
tenant(s) is protected by the Residential Tenancies Act and any tenancy
agreements cannot be terminated except in compliance with the Act.

• Debt consolidation and restructuring loan payments are often used by lenders to
try to resolve mortgage defaults, but they are non legal remedies attempted prior
to the lender taking legal action.

• A mortgagee first of all will sue for possession, obtain a judgment, evict the
mortgagor and then finally sell the property under power of sale.