I’m consistently being asked, what’s the difference between…? So, I’m going to explain to you the difference between mortgage terms that are usually misunderstood.  Hopefully, this will clear up any confusion you face.

LAWYER VS NOTARY

Simply put, both will prepare the documents for you days before your completion date. Upon purchase, they will: conduct a title search, obtain tax information and any additional information to prepare the Statement of Adjustments. Next they prepare closing documents, such as a title transfer, mortgage, property transfer tax forms and forward them to the seller’s lawyer/notary for completion. After you sign the papers, the lawyer or notary registers the transfer, mortgage documents and sends the funds to the seller’s lawyer/notary. In more complicated transactions, one would need to decide LAWYER or NOTARY? Let me explain.

If something were to go wrong with your transaction, a notary cannot represent you in court of law, a lawyer can. Nor can the notaries represent and guide you through a dispute process. Notary cannot advise you on legal matters. For example, if you go to a notary to convey a real estate file and you were to ask a legal question, such as, “I think my neighbour’s fence is on my land, what should I do?” the notary cannot give you advice on what your recourse is.

With regard to how much each charge, there isn’t much of a difference. If you are unsure of which one to use, call a couple difference notary and lawyer offices, explain what you need done, and pick which one is best suited for your needs.

GUARANTOR VS CO-SIGNER

A co-signer is a co-owner that is registered on the title and is equally accountable for payments, while a guarantor personally guarantees the payments will be made if the original applicant defaults. That being said, the guarantor has no claim to the property as they’re not registered on the title. In most cases, a co-signer is added to a mortgage application to increase the income, which will assist with the amount being able to borrow. Whereas a guarantor will be utilized if the applicant(s) has received past credit blemishes and needs to strengthen the file.

TITLE INSURANCE VS SURVEY CERTIFICATE

These two are slightly different but work in conjunction with one another. Title insurance is an assurance as to the state of title of any given property. What that means is, it protects lenders and purchasers against loss or damage suffered due to survey problems, defects in title and other matters relating to title fraud. A survey certificate simply shows the lot boundaries, improvement locations and often the locations of any rights of ways or easements registered against the property. This will also assist a purchaser in determining whether any of the improvements on the property encroach on a neighbouring property or if there are improvements from an adjacent property that encroach on the subject property.

JOINT TENANT VS TENANT IN COMMON

When a property is held in joint tenancy, the situation is what I refer to as “the last man standing.” When one joint tenant dies, the entire property belongs to the remaining, surviving joint tenant(s). Only that last person can use his or her Will to give the property to someone else. Tenants in common means that each person owns a percentage of the property, that is registered in their name. They can then leave their share to someone in their Will or sell it.

SWITCH/TRANSFER VS RE-FINANCE

To switch/transfer one’s mortgage, it involves moving your current mortgage from one lender to another without changing anything except for the term and interest rate. Amortization remains the same. If switching lenders within the term, there will likely be a penalty for breaking the mortgage, though often the savings in moving to another lender with a better rate will substantially outweigh the penalty. Doing a switch at the end of your mortgage term will allow you to completely avoid the penalty.

In re-financing a mortgage, the borrower is also likely taking advantage of lower rates whilst at the same time accessing equity. The reasons for this could range from; debt consolidation, renovation, purchasing a vacation home, post-secondary education, investment planning and so on… Two other major differences are when one wants to re-finance, the maximum loan is 80% of the market value, whereas a switch/transfer lender can surpass the 80% mark as the mortgage amount does not change. And finally, with re-financing the mortgage will need to be disbursed and re-registered with the lender (or new lender) therefore a fee will be charged. With a switch/transfer, there is a possibility that there will be no extra fees charged.

 BI-WEEKLY PAYMENT FREQUENCY VS ACCELERATED BI-WEEKLY

Nobody wants a mortgage and everyone that has one wants to pay it off faster, or at least they should. Payments are income streams that lenders blend a principal and interest amount into one payment with the goal to pay more principal than interest. As one gets further through the term the inevitable shift happens from paying more interest to paying more principal (P&I).

The bi-weekly payment is basically 12 monthly payments spread out over 26 instalments or every other week. For example, if your monthly payment is $2,000 your total yearly mortgage payment will be $24,000. The bi-weekly or 26 payment equivalent is $923.08 ($24,000.08), the net amount remaining unchanged. To speed up the inevitable P&I shift, one might want to opt for accelerated bi-weekly payment frequency. This is the key to shortening or reducing the life of the mortgage (amortization). An accelerated bi-weekly mortgage payment is when your monthly mortgage payment is divided by two and the amount is withdrawn from your bank account every two weeks. With an accelerated bi-weekly mortgage payment, you still make 26 payments per year but the payment amount is slightly more than a regular bi-weekly mortgage payment. So for example, if your monthly payment was $2,000 your accelerated bi-weekly payment would be $1,000 every two weeks. This equates to one extra monthly payment per year and in theory, reduces your amortization by 3.5 years.

Obviously if you have questions, I’m here for you.

– D