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Upgrading your Living Space. The Final Chapter
Financial and Legal Advice for Home Buyers

Pray for London
Post Easter 2020
Mission Peru 2020 (A Dad’s Perspective)
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Must Read Tips for Upgrading Your Living Space - The First in a Three Part Series

Should we stay or should we go? That IS the Question

Upgrading Your Outdoor Living Space - III

In this final article Upgrading your Living Space, we have sought the advise of experts for those of you contemplating buying a new (or new to you) house. These contributors have provided important considerations about borrowing and what you need to know on the legal side of real estate transactions.

The mortgage

There may be a difference between an amount you can qualify for, and the amount you can "live" with.

According to Libro Credit Union, it’s OK to worry a little bit. Be conservative - understand that buying a home is a risk like any other investment; only with this one you get emotionally attached. And that can blur things.

Find a mortgage coach that you can trust. Ask around, your friends and family will know of or have heard of great advisors and lousy advisors. If you don’t feel comfortable at the first meeting, you will most likely feel no better at the 2nd, or 3rd... Don't settle for just anyone because choosing a mortgage is a daunting task and unlike the olden days, once size does not fit all.

For example, here are some of the options to consider:

Fixed or Variable Rate Mortgage

A fixed rate means your interest is set for the entire term of the mortgage. You'll always know what your mortgage payments will be and how much of your mortgage will be paid off at the end of the term.

A variable rate mortgage can change with the markets because the rate is based on prime rate, which moves. Rates start at prime and go up from there. Your payment stays the same each month, but the amount going to interest and principal changes.

Open or Closed Mortgage

Open mortgages can be paid off anytime without a penalty, they provide the greatest amount of flexibility, but a rate premium may be included.

Closed mortgages cannot be paid off early (without paying a penalty), but can offer a lower rate overall.

Conventional or Collateral

A conventional mortgage is tied to the property and can't be altered. If you want to make any changes, a new mortgage must be set up.

A collateral mortgage is more flexible. It's like a blanket loan over your whole property and can include lines of credit. A collateral mortgage can be up to 80% of the value of your home. The other 20% is your down payment.

High-Ratio Mortgage

A high-ratio mortgage is always conventional and occurs when the mortgage is more than 80% of the purchase price of your home. That means you have less than a 20% down payment and require additional insurance from the Canada Mortgage and Housing Corporation (CMHC) or Genworth. For additional cost, you can get a mortgage for up to 95% of your home's purchase price.

What if you don't have the money to do some needed upgrades on your new home?

Mindy Small is a mortgage broker with Dominion Financial and she says, "One of the most overlooked but cost effective ways of financing needed renovations would be to add those costs to your mortgage. There are ways to get lenders to value your home based on what the home will be worth after the renovations are complete. You then get an approval based on this "after-improved value".

Mindy continues, "The closing comes and the lender will give you money based on the purchase price or current value of the home, while the improvement money is held back until the improvements are completed (within 3 months). Once the improvements are finalized, an accredited inspector will visit your property to ensure the work is completed as planned and then your lawyer will be instructed by the lender to release that percentage of funds."

Mindy is available to answer your questions so drop her a line at 519.549.2834 or by email;

Next: What is the lawyer's role in your real estate transaction? For this, we bring back this excellent 2013 advice article prepared for us by Michael A. Menear, a senior partner with the London law firm Menear Worrad & Associates.

Having practiced law since 1994 with the same law firm and for most of that time dealing with real estate transactions, I have been asked many questions covering a variety of topics. Some questions are time sensitive (particular government grants, tax relief, mortgage options, etc.) while other questions are more enduring in nature (what is title? how can we hold title? what is a title defect? etc.).

While these different types of questions have arisen over the years, there is really just one question which I was asked during my first year of practice and which has remained relevant for the almost 19 years since. That question is, "What is the lawyer's role in my real estate transaction?" While the mechanics of a real estate transaction have changed over time, the lawyer's role has not.

This article will seek to explain exactly what the lawyer's role is, or should be. Specifically, I will address the lawyer's role in the context of negotiating an Agreement of Purchase and Sale ("Agreement"). In subsequent articles I will describe the lawyer's role in searching title, registering/discharging mortgages, and closing the transaction.

While an Agreement contains different provisions which impact a particular real estate transaction, the lawyer's obligation to look after the best interests of his or her client does not change nor does the lawyer's obligation to keep all matters related to that transaction confidential and free from any conflicting interest. This is because a lawyer's role is first and foremost a fiduciary one. Specifically, this means that the lawyer has a confidential relationship with his or her client that requires the lawyer to act in the best interests of that particular client.

For these reasons, a lawyer cannot act for a Vendor and Purchaser on the same transaction unless both parties are "related" as defined by the Income Tax Act (if individuals…by blood, marriage or common law, or adoption). Even when a lawyer is entitled to act for both the Vendor and Purchaser because they are "related", all parties should be advised that the lawyer is acting for both parties and:
i) that no communication can remain confidential; and
ii) if a conflict arises, both parties must be referred out to independent lawyers who can represent them fully.

Traditionally, the lawyer's relationship with a particular client does not start until after an Agreement has been signed by both Vendor and Purchaser. Given the obligation of the lawyer to act as a fiduciary for his or her client at all times, a lawyer's input may be helpful when negotiating the Agreement. It would not serve any Vendor or Purchaser well to have an agent taking instructions from both a Vendor as well as a Purchaser when drafting the Agreement. However, this type of situation can exist where the real estate agent acting for a Purchaser is employed by the same brokerage as the listing agent for the Vendor.

For this reason, the lawyer's responsibility to act for his or her client's interest (independent of everyone else's) may provide the client with a clearer perspective because it does not have to accommodate the concerns and interests of the parties at the same time. A lawyer can not only provide independent advice, but also anticipate potential difficulties before an Agreement is signed. Once an Agreement has been signed, the lawyer's fiduciary obligations are constrained by the terms set out in the Agreement. There is nothing more frustrating than having to tell a client that the terms of the Agreement do not allow me to fully address their concerns. For clarity and protection, a client should consider consulting a lawyer before finalizing any Agreement.

By and large, the real estate agents in London I have dealt with do a good job of looking after their client's interests. My recommendation here is not to replace the agent's role but to support it with a legal review of a proposed Agreement. This can either be done by having a lawyer review it prior to it being presented or, where time does not permit that review, including a short condition (2 or 3 days) to allow for the Buyer's or Seller's lawyer, as the case may be, to satisfy themselves that the Agreement will protect their client to the greatest extent possible.

We thank all of those that participated in our series Upgrading your Living Space with articles on indoor and outdoor renovations, alternative furnishing option, should I stay or should I go and finally real estate legal and financial advice.

We hope this series has provided you with helpful information.