What happens in a mortgage?

Victoria BC mortgages guide

As a real estate lawyer, I view myself as a guide for people who enter into a legal transaction which involves a contract to buy, sell or refinance a piece of real estate.

For most people, real estate is not an everyday kind of transaction. Buying a property is a big deal and is often the most important legal transaction with which they will be involved in their lifetime.

Your legal guide

I am automatically a notary by virtue of being a lawyer as our training is more extensive and we are qualified to give legal advice to clients which a notary is not permitted to do.  As I do this work every day and for many years as a real estate lawyer as well as specializing in other areas of law, I have extensive practical experience in addition to my qualifications. This means I bring all of this to the table for you, acting as your legal guide to navigating your transaction to a successful closing.

The way I work is to get all the information I need right at the start and also ensure that I have the contact information of all the other professionals involved. That enables me to call on these other parties when I am missing documentation and this means you’re not unnecessarily stressed when things need follow-up.

When I have all the searches done, when I have received the mortgage instructions and have prepared the mortgage documentation and other documentation necessary, then we schedule an appointment to sign all the documents. At this point, you bring a bank draft payable to the law firm in trust for the amount calculated to complete the transaction.

We walk you through the documentation, advising you on what you need to know about each document before signing. There is plenty of opportunities to answer your questions along the way.

The first document we go through is the title of the property. Although ideally, we will have looked at this with you prior to the removal of subjects if you are buying, many buyers don’t realize that they can get their lawyer to review the title prior to subject removal.

We examine your identification, one of which has to be a valid driver’s licence or passport. The second piece can be a Health Card, SIN card or major credit card.

Usually, toward the end of the appointment, we go through the Statement of Adjustments which explains where your money goes, what is required to complete a purchase, or if it’s a sale, how much you can expect to receive after payout of any mortgages, if any, on title.

What if you aren’t using a realtor?

If you are not using a realtor and are entering into a so-called “private sale” we can assist you with the drafting of the contract. We can also hold the deposit of the buyer in our trust account. This is usually paid to a realtor when a realtor is involved. We do recommend using a realtor though as this is your guide when finding the property.

Refinancing?

If you’re refinancing a property by obtaining a new mortgage and paying out an existing mortgage, the Order to Pay will state the payout amount of the old mortgage and this will be deducted from the new mortgage proceeds.   Other costs and disbursements are deducted from the new mortgage proceeds and the remaining amount is paid to you.

We do offer the option to make a direct deposit to your bank account if held at a major bank and credit union. You’ll need to provide a void cheque or your banking details on a bank form to ensure the accuracy of account information.

Insurance issues

Often the bank has additional requirements like title insurance which we will then order on your behalf. This is an added cost that is added to your statement of adjustments or order to pay. If title insurance is not compulsory, we do also explain what it is in case you may still want it for your own peace of mind.

If you’re buying a house as opposed to a strata property, we explain the difference between a survey or title insurance and ask if you require either. If you are obtaining a mortgage, the bank will require one or the other regardless and it’s important for you to make an informed decision as to which one to chose. Often we have been able to obtain a survey from the seller’s realtor or lawyer which can be updated with a statutory declaration as to its currency and this can save you money.

Once you’ve signed the documentation and the bank draft for any funds required to complete has been received, you can go home and focus on packing for moving day.

Completing the paperwork

We gather the last few documents we will require for closing.   We receive cheques from realtors in trust for amounts that are part of the deposit paid to them less their commission, although this usually comes in earlier at the start of the process and can often come in just before closing as well.

We prepare the documents for electronic filing at Land Titles office and on the closing day, the lawyer applies a digital signature which is given to lawyers and notaries to digitally sign the documents which confirms to the Land Titles office that the lawyer has an original signed document in his/her possession. This enables the Land Titles office to accept the documentation for registration.

Some documents will change the ownership and others file a charge like a mortgage against the title. You don’t need to worry about this, as it is the lawyer’s job to ensure that registration happens in accordance with the contract of purchase and sale and the executed documents and that any mortgage given by a bank is registered against your title to the property so that the bank has the property as security for the funds that have been advanced to you as part of your purchase transaction.

Money matters

Once registration has taken place, cheques are prepared according to the type of transaction. In the event of a purchase or sale, the realtors are advised that the transaction has closed and they are provided with the registration number as this allows them to release the keys to the buyer for the possession day which is usually the day after closing but is dictated by what was agreed by the parties in the contract. We contact you to let you know that everything has closed.

Any excess funds remaining in trust that were not used on closing are refunded to you as everything has to balance down to zero in the client’s trust account at the law firm. Often there are holdbacks that we are required to hold in trust until the conditions have been satisfied for release.   This is something we will monitor after closing and release as soon as the conditions are met for release.

Non-resident sellers

There are many other things that can come to bear on a file which is not necessarily typical of every file. For example, if you are a non-resident seller, your lawyer has to hold back a certain amount of funds in trust until such time as the Canadian Revenue Agency has issued a certificate clearing payment of taxes. Often an amount has to be paid to CRA for the issue of the certificate and this is paid by the lawyer to CRA from the holdback.

At the time of taking instructions and opening the file, your lawyer will discuss all the things that your file will need. We pride ourselves on developing a relationship with our client right from the outset so that we can make your experience of the legal transaction effortless as far as that is possible.

Dealing with unexpected issues

Sometimes things do come up. An example of this can be a collapsing deal where one party can not complete on the scheduled closing date or at all.   If the parties do not agree to extend the closing date, then the deal collapses and there are all sorts of legal issues that arise at that time and require the skill and expertise of a lawyer.

This is often the time when parties who have used a notary find that they can go no further with the notary as notaries are not qualified to give legal advice. This means that the notary has to hand the file over to a lawyer. If you have used KBL Law Corporation from the start, we take care of the collapsing deal situation immediately.

There are many other pieces that will be floating in the environment of each file we open and we take care of these other requirements regardless of where they come from, whether it be bank requirements, conditions in the contract, other lawyer requirements or simply something that crops up on the file at the time of closing.

If a party is signing by power of attorney and it has not been registered at Land Titles, we will get that registered right away so that the closing documents can be executed under the Power.

What happens after closing?

After closing, we monitor the file for discharge of the old/seller’s mortgages on the title and this can take as much as 60 days. We file the necessary discharges or follow up on obtaining discharge particulars as the case may be.

Once all old mortgages are off the title, we can apply for a State of Title certificate from the Land Titles office. Before this, we will have also prepared a report to the client and a Final Report of Registration and Security for the bank.  In fact, you’re likely to have moved in and almost forgotten about us and we’ll still be working on your final documents!

Your biggest investment

For most people, a mortgage is the biggest investment they ever make and often they have cleaned out their life savings in order to make the purchase. We take that seriously. You want to know that everything will be done properly and you’ll get what you contracted to get. Our goal is to make the entire process seamless.

Leasehold properties

We also have experience dealing with Leasehold properties which require a completely different legal approach as they are a completely different kind of ownership. If you are buying a leasehold we recommend that you contact us and we can explain the type of ownership and can assist you with the next steps.

Contact Us for any questions you may have.