The Closing Process

After the completion of the mortgage process, the closing process can begin once a property has been selected. The closing process is typically easy for the borrower as most of the work is the key participants’ role. For closing costs please view the bottom of the page. The closing process usually involves seven steps with the mortgage professional, lawyers, and lenders as follows:

The Commitment Letter
Lawyer Procedures
Final Documentation Prior to Funds
Disclosure
Disbursement of Funds
Registration
Final Documentation After Funds

Have a look below to learn more:

The Commitment Letter

Once the mortgage application has been approved, the lender will forward a “Commitment Letter” to the borrower. The letter sets out all details of the mortgage and must be signed & returned to the lender. All associated mortgage documents are often signed at the lawyer’s office, where you will provide your down payment and confirm your identity.

Lawyer Procedures

The lawyer involved will receive a “Letter of Instruction” which officially gives the lawyer permission to be involved in the closing process for both the lender and borrower. Typically it will state that the lawyer is to act for the lender in preparation and registration of the mortgage and to supervise the disbursement of funds. The lawyer will also verify the details of the real estate transaction and provide a report which gives the details of the mortgage. It will also feature the results of the title search and borrower’s insurance details.

Final Documentation Prior to Funds

The lender will receive a survey, lawyers report, and title insurance details prior to the advancement of mortgage funds. The survey sets out the legal description of the property, but sometimes it is not required. If title insurance was obtained by the borrower the lender will ask for details. The borrower will receive a list of mortgage terms and conditions from the lender prior to the advancement of mortgage funds. This allows for a final review from the borrower to ensure the terms are exactly what was agreed upon.

Disclosure

The borrower will receive disclosure documents that state the following information:

Fees and charges associated with the mortgage
Mortgage details
General payment details
Conflicts of interest
Receipt or payment of referral fees
Mortgage professional compensation

The disclosure documents must be signed by all borrowers involved in the transaction.

Disbursement of Funds

The lender will disburse the funds to the lawyer involved. From there, the funds will be advanced to the seller’s lawyer, and then to the seller himself/herself. The funds will not be advanced until the lender’s lawyer confirms that they are in the correct position to do so.

Registration

The lawyer will perform a title search on the day of closing to ensure there is no change in title. If no other change has been observed, the lawyer will transfer titles accordingly and register the mortgage with the land registry office.

Final Documentation After Funds

A few weeks after closing the borrower will receive a report from the lawyer signifying that the mortgage was registered, that there were no outstanding taxes, and a copy of the title search and title insurance (if obtained).

Closing Costs

As a borrower it is important to remember to incorporate the costs of closing when you are budgeting your mortgage and new real estate transaction. Normally, you should budget about 1-2% of the purchase price for closing costs. Lawyers are most familiar with closing costs as they vary from municipality to municipality, however some common closing costs are as follows:

Land transfer tax: Click Here for a calculation
Legal costs: Features lawyer, registration, and title search fees
Land survey fee: When a land survey is indeed required
Appraisal: Usually required, but varies from lender to lender
Home inspection: Typically featured in the homebuyer’s due diligence procedures
Home insurance: One of the buyer covenants agreed with the lender. For more information view our Covenants Page or our Insurance Page 
Title insurance: If obtained. For more information view our Insurance Page 
Mortgage default insurance HST: Must be paid on closing, rather than added to the mortgage amount. For more information on mortgage default insurance view our Insurance Page or to calculate your premium view our CMHC Insurance Calculator 
Mortgage default insurance application fee: The insurer usually charges a small fee for applying
New home HST: Often featured in the purchase price
New home warranty: If the home is newly constructed, you may have this option
 

For a more in-depth and professional review of your individual and personalized situation please give Harpreet Singh The Mortgage King a call at (416) 795-1919.

Connect with us on:
FacebooktwitterFacebooktwitter
css.php