If you’ve decided to become a homeowner, you may be considering obtaining a mortgage to finance your home. If you do, you’ll be joining millions of Canadians in doing so. While extremely common, mortgages are also complex and can be challenging to understand.
Having a number of professionals walk you through your mortgage commitment is a must, and your real estate lawyer is an essential part of your mortgage journey. Your real estate lawyer will walk you through your costs, total debt, standard terms and special clauses, as well as all the other confusing legal jargon that can be difficult to understand without the assistance of a lawyer. Of course, your lawyer is also there to answer any of your questions and make sure you know your mortgage like the back of your hand. Specifically, your real estate lawyer is one of the only professionals who can advise you on the risks associated with a mortgage. So, let’s talk about how:
When you purchase your home, your lawyer must receive a “mortgage discharge” from the seller’s lawyer if the seller had a mortgage on the property. This mortgage discharge guarantees that the person selling you a home pays off their mortgage and their lawyer discharges it. Discharging the mortgage means that it won’t appear on the title of a property as an active mortgage. So, if you want to sell your home in 5 or 50 years, you won’t run into any trouble. If that previous mortgage wasn’t discharged, you would face serious problems trying to sell, refinance, or really deal with your home in any way. Therefore, your lawyer is acting in your best interest and protecting you from any potential future issues by ensuring that any existing mortgages on title are discharged prior to your purchase of the property.
Today, many lenders have declared title insurance as a requirement before providing a mortgage. As a purchaser, you’ll most likely be buying title insurance to protect yourself and your bank. The good news is that Title Insurance is a one-time payment that’s actually worth it. Should you run into any issues with your title such as undiscovered liens or easements on your property or forged transfers of ownership, your lawyer will offer financial protection by helping you submit a title insurance claim and collecting any compensation to which you are legally entitled. Now that’s some serious peace of mind.
Although uncommon, a small percentage of homeowners become victims of fraud and are financially impacted. There are a few forms of fraud that concern a homebuyer and their mortgage, so let’s review:
- Title/Mortgage Fraud: Sometimes referred to as “mortgage fraud”, this kind of fraud usually starts with identity theft (discussed below). If someone manages to steal your personal information, they can attempt to steal ownership of your home. They may use your identity to transfer the title of your home to them without your knowledge. Once they do so, they’ll typically either sell your home or place a mortgage on it. After they collect the funds from either the sale or loan, they disappear and leave you either homeless, with a great deal of debt, or both.
- Identify Theft: While Ontario’s Land Registry is an incredibly secure system, it’s still a system that’s susceptible to fraud (as with any system). Homeowners should be proactive in keeping their personal information private. Should a fraudster gain access to your information, it’s not hard for them to impersonate you and attempt to steal or place a mortgage on your home.
- Foreclosure Fraud: If you default on your mortgage, your lender may foreclose on your home. If you’re having trouble making your mortgage payments you may be tricked into giving your property to someone in return for a loan that’ll help you make your payments. Fraudsters will not only keep your payments but also sell or refinance your home and leave you with the mess.
So, what role does your lawyer play? Your real estate lawyer protects you from fraud by searching the title of your home. As they study the records, they’re able to identify any potential issues and flag anything that may seem suspicious to protect you from fraud as much as possible. Your lawyer will also explain the benefits of title insurance and how it can help protect you from fraudulent activities.