Can you break your mortgage?

Short and sweet this week. The answer: usually. Before you sign to refinance, check your existing mortgage – some banks only allow you to pay out your current mortgage if you are selling. It’s in the fine print, and they’ll hold you to it.

The better question is, should you break your mortgage.

Do you have a right to see the will?

Only if you’re named in it. If you think you might be a beneficiary, it can be helpful to have your own lawyer contact the executor to see if they would be willing to share the will with you, but ultimately, if you are not named in it, you have no legal right to see it.

What should you have in writing when co-owing a house?

If you are buying a house with someone who does not share their financial life with you, you will need to consider several extra points in addition to where and how much. The first question is how to take title [reference last post]; the second is how you run the day-to-day and the big questions of when to sell or refinance.

Whenever I have clients going on title to a property with a sibling or parent, I recommend they get a trust agreement that details their obligations. It discusses who is responsible for which expenses (mortgage, taxes, insurance, maintenance, etc.), who can authorize a new mortgage, and when the property can be sold (and how much each party gets on a sale).

 

Having the rules set out clearly at the beginning makes for far less stress going forward.

Mirror, mirror?

I see a lot of couples who come in to do their estate planning together. Usually, it is a first marriage for both, and they want to leave their entire estate to each other. This is a situation where it often makes sense for them to see me as a couple. Sometimes, though, it doesn’t.

When you see the same lawyer as a couple, that lawyer has an obligation to disclose information shared with them to the other party. This includes years in the future, if you want to make any changes – you can’t do that with the same lawyer without your spouse’s consent. As long as you are both married to each other and both alive, that lawyer is conflicted out of doing anything for only one of you on the same matter.

One solution is to do two separate retainers – you each do your wills with the same lawyer, but individually. This allows you to change your wills in the future. This would make more sense in the situation of a second or later marriage where you might want to leave assets to someone other than your spouse.

Ultimately, this is a question to discuss with your lawyer, before you go ahead with will instructions.

What is the best way to take title with a parent?

I see a lot of clients who are buying their first homes, and getting some assistance with either the down payment or the financing from a family member, usually a parent. Most of the time, because it’s not something they would have come across on their own, they have not considered how they should take title.

There are two ways of taking title to property in Ontario: joint tenants, and tenants in common. Joint tenants means that everyone owns the whole thing jointly with everyone else, and there are survivorship rights if one owner dies. Tenants in common means that you own shares, in whatever percentage you decide – the default is equal shares, but you can set it differently. For example, if you are going on title to your daughter’s house solely for financing, you can own 1% and she can own 99% to maximize her first-time buyer rights and minimize any chance you could be charged capital gains taxes.

If you are going on title with anyone – even with a spouse – you should be asked how you want to take title, and get more information if you’re not sure. It’s a big decision that can affect you financially down the road.

What happens if your inheritance is late?

With estates, and assets, becoming increasingly complicated, it is not uncommon for it to take some time to distribute assets out to beneficiaries. Sometimes, this can take several months; sometimes, several years. If your inheritance is sitting in a bank account for an extended amount of time, what are your rights?

In Ontario, we have what is informally known as the “executor’s year”: basically, the executor of an estate has one calendar year to start distributing assets, after which the beneficiary is entitled to interest on their inheritance back-dated to the date of death. While this timeline can be extended with justification, generally, as an executor, you should work to have the assets distributed as quickly as is practical.

Protect yourself from fraud through title insurance

A few weeks ago, I mentioned title insurance as a common cost on a purchase. What is title insurance?

Basically, title insurance protects against things you have no control over. The big one is fraud; if someone impersonates you and puts a fake mortgage on your house, or sells it, then your title insurance will fix things.

 

It also protects against a former owner doing work without a permit, or a neighbour building something onto your property.

 

Given the small cost of title insurance, it’s generally well worth it.

Where will you be buried?

In Ontario, much to the surprise of many, you cannot dictate what happens to your body on your death. It is, by law, the property of your executor. For that reason, it is incredibly important to have a will in place that names an executor if you want to ensure who takes care of your body.

There was a case last year that involved six siblings and a dispute over where their mother should be buried. It’s a very sad case to read, but it also clearly illustrates the point that it is critical to think about who will respect your wishes about your burial. Another reason, among many, to be thoughtful about choosing an executor, and to choose one.

Happy Canada Day!

We hope that you have a safe and happy holiday weekend.

3 extra costs to budget for on a sale

Last time I blogged about extra costs on a purchase. Today is three extra costs to budget for on a sale.

  1. Realtor’s commission. You will have to pay it on the sale, and not at a later date. Even if you are selling by yourself, you may have to pay a buyer’s commission. Don’t forget that they have to charge HST on their commission.
  2. Legal costs. Many lawyers (including our firm) will give you an estimate of legal fees and disbursements before you make a decision about who to hire. Get a quote if you can so that you know how much it will cost as it gets taken off the sale proceeds before you get your cheque.
  3. Mortgage discharge. This is where the big costs often come in. Many people assume they know what the penalty will be, and then it ends up higher. There are discharge fees, and fees to register the discharge. You should be able to get an estimate from the bank so that you know what to expect when the closing day comes around.