October 2003 Issue

Dear Home Buyer,

As your first home purchase specialists, we work on your behalf to find the home and mortgage that suits your needs. Best of all - our service is "FREE"*. 

In this Issue


  • Cashback mortgages
  • Title Insurance
  • What is an appraisal?

 Cashback Mortgages

Cashback mortgages allows the borrower to get between 1% to 6% of the mortgage amount when the mortgage is advanced.  Money you could use for furniture, renovations, appliance, or whatever you need to use it for.  But, is it really a good deal?

I reviewed cashback products from three major financial companies and the results surprised me.  The first lender offered cashbacks between 1% - 5%.  The 5% was offered on their 10-year mortgage product.  Comparing the difference in payments against the regular no cashback product, I calculated that the borrower would pay an additional $17,234 on a $200,000 mortgage.  The second lender's 10-year mortgage also had a 5% cashback.  But in this case, the additional payments were more reasonable at $2,980.  The third lender had a 4.5% cashback on their 10-year mortgage and the additional payments were at $5,711.  In all cases, when you take a cashback there is a hidden cost that you need to be aware of.  

Cashbacks can make comparing interest rates among lenders difficult to compare.  For more information, visit www.bcmortgage.ca/cashback.htm.

Title Insurance

Title insurance protects the insured from title defects and survey defects.  Most lenders will accept title insurance in lieu of a survey.  The cost of a survey is approximately $150.00

Title insurance protects you against:

Fraud & Forgery

  • Forged documents
  • Impersonations

Title Defects

  • Unmarketability of title
  • Errors or omissions in the public registry
  • Unregistered easements (utility, pipeline, etc.)
  • Priority of other liens or encumbrances
  • Executions or court judgments
  • Undisclosed or missing heirs

Survey Problems

  • Errors in existing surveys, Real Property Reports or Building Loation Certificates
  • Encroachment(s) on a neighboring property, zoning setback violations or easements
  • No legal access to the property (right of way)
  • Municipal zoning and by-law infractions
  • Contravention of subdivision, development and other agreements

What is an appraisal? 

An appraisal provides the lending institution a professional opinion as to the fair market value (FMV) of the property.  Appraisals are performed by specialists certified for this purpose. 

Appraisals are required when you have more than 25% of the purchase price to put down.  For mortgages with less than 25% down payment, the mortgage will generally be insured by the Canadian Home Mortgage Corporation (CMHC) or GE Mortgage Insurance Company.  CMHC and GE Mortgage Insurance do not require an appraisal since they have their own system for valuing properties.

Resources:

  • BCMortgage.ca - BC's most comprehensive website for mortgages for first time home buyers
  • CMHC - Canadian Mortgage and Home Corporation
  • Equifax - Obtain your credit reports online

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