Sources: Educaloi.qc.ca
Whether you are buying a house or a car, a new or used condo, a plex or a business, it’s a safe bet that you’ll hear about a mortgage. But what is a mortgage and what do the different types of mortgage involve?
What is a mortgage?
A mortgage is a right , related to an asset, which is given by one person (the debtor) to another person (the creditor) as a guarantee that the debtor will discharge an obligation (to repay a loan, for example ). The obligation is generally owed to the creditor by the debtor and the debtor almost always owns the property.
If the debtor does not fulfill his obligation, the creditor can use his rights under the mortgage to compensate for the fact that the obligation has not been fulfilled. We say that a property on which we have given a mortgage is “mortgaged”. A loan whose repayment is secured by a mortgage is called a “ mortgage loan ”.
For example, you gave the bank a mortgage on your house to guarantee the repayment of a loan of $ 100,000. If you stop paying off their loan, the bank can sell the house to collect the money you owe them.
What rights does a mortgage give to the creditor?
A mortgage on property gives the creditor the right to:
- Sell the property
- Have the property sold in court
- Take possession of the property to administer it (for example if it is a business)
- Take the property as payment for the debtor’s obligation.
When can a creditor exercise the rights arising from the mortgage?
Only when certain conditions are met:
- The debtor is “in default” (see the question “When, is a debtor considered to be“ in default ”?)
- The scheduled date for the fulfillment of the obligation has arrived. For example, the loan has come to its due date.
- The amount of money the bond is worth can be determined. For example, the unpaid portion of the loan totals $ 50,000.
In addition, the creditor must take certain steps before being able to exercise the rights arising from the mortgage. (See the question “What must a creditor do before he can exercise his rights under the mortgage?”).
When is a debtor considered to be “in default”?
A debtor is in default when he fails to fulfill his obligation in favor of the creditor. An obligation is a promise made in a contract by which the debtor undertakes to do or not to do something. For example, Manon and her bank signed a contract in which Manon undertakes to reimburse the $ 10,000 that the bank loaned her. Manon has the obligation to repay the loan. If Manon misses a monthly payment and stops repaying the loan, she is in default because she failed to meet her obligation to the bank.
Other facts which will be considered as putting the debtor in default may be provided for in the contract between the debtor and the creditor. For example, the contract between Manon and the bank provides that Manon will be in default if she does not keep her house insured. So Manon has to keep her house insured, or she will be in default and the bank could exercise the rights she has under the mortgage. (See the question “What rights does a mortgage give to the creditor?”) This is one of the reasons why you must have insurance on the day you sign the deed of loan.
The debtor must be in default before the creditor can exercise his rights under the mortgage. Therefore, if the debtor fulfills his obligation towards the creditor, the latter cannot exercise his rights.
What must a creditor do before exercising his rights under the mortgage?
The creditor must first send the debtor a document called notice. This notice must then be published (registered) at the registry office where the mortgage was published, either the land register or the Register of personal and movable real rights (RDPRM). In order to register the notice, the creditor must prove that he sent it to the debtor.
The notice must:
- Indicate the reasons why the debtor is in default (see the question “When is a debtor considered to be” in default? “).
- Remind the debtor of his right to remedy the default (take action to no longer be in default).
- Indicate the total amount, including interest if any, that the debtor owes to the creditor.
- Specify which right the creditor intends to exercise over the mortgaged property (see the question “What rights does a mortgage give to the creditor?”).
- Describe the mortgaged property.
- Inform the debtor that he must abandon (hand over) the mortgaged property within a certain period.
The period for abandoning the mortgaged property begins when the notice is registered. The creditor must usually wait until the end of these periods before exercising his rights under the mortgage. The period is 10 days if the creditor intends to take possession of the property to administer it. Otherwise, the length of the delay varies depending on the type of property mortgaged:
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MORTGAGE ON:
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TIME TO RELINQUISH THE PROPERTY
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Land or building
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60 days
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Movable property (when the mortgage results from a contract between a consumer and a merchant)
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30 days
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Movable property (when the mortgage does not arise from a contract between a consumer and a merchant)
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20 days
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How do you create a mortgage on land or a building?
Mortgages on land or a building (house, apartment building, etc.) are called real estate mortgages. In general, any owner of land or building can decide to mortgage it. A real estate mortgage must be created in a notarial deed en minute, ie by a notary. The act that creates the immovable mortgage must describe the mortgaged property and specify the amount of money to which the mortgage relates.
The amount of money the mortgage is on is the maximum amount that the creditor will be able to recover under the mortgage. This is usually a higher amount than the amount owed to the creditor by the debtor, because the creditor thus ensures that the mortgage covers not only the amount of the debt, but also interest and other charges, such as charges. costs of foreclosure and sale of the mortgaged property.
For example, Luke borrows $ 200,000 from the bank and to secure the loan he gives him a mortgage on his house. The notarial deed that creates the mortgage indicates that it relates to an amount of $ 220,000. Luke defaults on his obligation to repay the bank. Interest on the loan is $ 20,000. The bank decides to exercise its rights under the mortgage and sell the house. Under the mortgage, she can recover a maximum of $ 220,000. So that will cover the loan and the interest, but not the $ 5,000 she had to pay to sell the house.
A real estate mortgage must be published (registered) in the land register in order to be able to be invoked against a person other than a debtor. (See the question “why should you publish a mortgage”?).
Can there be mortgages on something other than land or a building?
Yes. A debtor can create a mortgage on property other than land or building (for example, a car) in two ways.
First, he can simply return the asset to the creditor. This type of mortgage is called a movable mortgage with delivery.
Then he can create the mortgage in a written document and keep the mortgaged property in his possession. This type of mortgage is called a movable mortgage without delivery. Some things – such as a registered retirement savings plan (RRSP) – cannot be mortgaged in this way.
To learn more about each of these mortgages, see the questions “What is a movable hypothec with delivery?” “And” Is it possible to create a movable hypothec while retaining the property ? “.
What is a movable hypothec with delivery?
Most movable property (that is, property other than land and buildings) can be the subject of a movable hypothec with delivery. The owner of movable property can decide to grant this type of mortgage on his property. A movable hypothec with delivery is also called a pledge. (Hence the expression “pawnbroker”).
The principle is simple. The mortgage is created when the debtor hands over the asset to the creditor. If the creditor is already in possession of the asset, then the mortgage is created by the debtor’s decision to leave it in the hands of the creditor.
For example, David goes to a pawnshop because he needs to borrow $ 200. The pawnshop, Hubert, agrees to lend him $ 200 in exchange for a movable hypothec with delivery on his watch. David accepts and leaves the watch to Hubert.
Like all mortgages, a movable hypothec with delivery must be published before it can be invoked against anyone other than the debtor. A movable hypothec with delivery is published when the creditor receives the mortgaged property. For example, when David gave his watch to Hubert. A person other than the creditor can also hold the asset if the debtor agrees. In this case, the mortgage will be published when that person receives notice that the property is subject to a movable hypothec with delivery.
A movable hypothec with delivery can also be published (registered) in the Register of Personal and Movable Real Rights (RDPRM). See the question “Why should you publish a mortgage?” “.
Is it possible to create a movable mortgage while keeping the property?
Yes, but not for all goods in all cases. The law provides that the property that can be mortgaged and kept varies depending on whether it is done for oneself or for the needs of a business.
A person who does not carry on a business
A person who does not carry on a business can establish a movable hypothec without delivery for:
- certain vehicles (for example: cars, motorcycles, motor vehicles, boats);
- certain particularly precious goods (for example: paintings, sculptures, jewelry, rare books, precious stamps or collector’s coins);
- certain assets which are not strictly speaking things – even if they are often created on a piece of paper – but which still have a value (for example: savings bonds, stocks, a participation in a fund placement, copyright, the right to use a trademark or exploit an invention).
WARNING ! the law excludes RRSPs, Registered Retirement Income Funds (RRIFs), Registered Education Savings Funds (FEEE) and Registered Disability Savings Plans (RDSPs).
A person who operates a business
If operating a business, a person could create a non-dispossessional chattel mortgage on other business property (eg computers and business furniture).
A moral person
Legal persons, like companies, can create a movable hypothec without delivery on any type of property.
How do you create a movable hypothec without delivery?
A movable hypothec without delivery must be created in writing. The document must describe the mortgaged property and specify the amount of money to which the mortgage relates.
The amount of money the mortgage is on is the maximum amount that the creditor will be able to recover under the mortgage. This is usually a higher amount than the amount owed to the creditor by the debtor, because the creditor thus ensures that the mortgage covers not only the amount of the debt, but also interest and other charges, such as charges. costs of foreclosure and sale of the mortgaged property.
A movable hypothec without delivery must be published (registered) in the Register of Personal and Movable Real Rights (RDPRM) to be in effect. See the question “Why should you publish a mortgage ? ”. There is one exception: a securities intermediary does not need to register a movable hypothec without delivery that it constitutes on securities or intermediated securities. Indeed, the law provides that this mortgage will be automatically published when it is created.
Why do you have to publish a mortgage?
Because this is what allows the creditor to retain his rights to the property even if it is sold. More specifically, the publication of a mortgage generally gives two rights to the creditor:
- A droit de suite on the mortgaged property
- A right to be preferred over the money arising from the sale of the mortgaged property.
A droit de suite means that the creditor can exercise his rights under the mortgage even if the mortgaged property is sold or given. The mortgage continues to exist even if the debtor no longer owns the property.
The right to be preferred over the money obtained from the sale of the property means that the creditor who holds a mortgage will be paid before other creditors. Unless the sale brings in a lot of money, he’ll often be the only one getting paid, by the way! (See the question “What happens when a mortgaged property is given or sold”?).
If the mortgage is not published, the sale of the mortgaged property deprives the creditor of his rights. He loses his resale right on the mortgaged property as well as his right to be preferred to other creditors during the sale. It is therefore very rare that a creditor forgets this important formality!
What happens if the mortgaged property is donated or sold?
If the mortgage has been published, the sale does not change the rights of the creditor. The latter can exercise the rights resulting from the mortgage even if the mortgaged property has a new owner. This right of the creditor is called the “droit de suite”.
If the debtor does not fulfill the obligation secured by the mortgage, the obligee may, for example, decide to take the mortgaged property as payment or to have it sold, even if it is in the hands of a new owner. The new owner is not obliged to fulfill the obligation secured by the mortgage in place of the debtor; however, he may decide to do so in order to be able to keep the mortgaged property.
For example, George bought a car from Marianne without checking the Register of Personal and Movable Real Rights (RDPRM). If he had, he would have discovered that a credit agency had issued a mortgage on the car. Marianne stops repaying her loan to the credit agency. The credit bureau informs George that she is going to sell his car to recover the money Marianne owes him, unless he pays instead of Marianne. George has a choice. He can let the credit agency seize and sell his new car, or he can repay the amount owed by Marianne and keep the car.
It should be mentioned that the seller of a property must guarantee the buyer that the property is not mortgaged or inform the buyer of any existing mortgage on the property. If he does not, the buyer can sue the seller:
- either to recover the amount paid for the purchase of the property, if the creditor exercises his rights;
- or to recover the amount paid to the creditor in order to be able to keep the property.
For example, George reimburses the credit agency for the $ 5,400 owed by Marianne to prevent the credit agency from seizing and selling the car. George then has the right to sue Marianne to recover this $ 5,400. Obviously, this remedy may be doomed to failure as Marianne’s financial situation is bad. She wasn’t able to repay that amount to the credit bureau, so she surely won’t be able to pay it back to George any more, even if he gets a judgment against her. That is why it is very important to check the RDPRM!
If the mortgage is not published, the creditor loses his resale right. For example, if the credit agency had not published its mortgage, it would not have had the right to sell George’s car to recover the amount owed by Marianne.
What happens if a property is encumbered by more than one mortgage?
When an asset is encumbered by more than one mortgage, the date, time and even the minute each mortgage was posted becomes very important! This is because mortgages published first take priority over those published later. A creditor who publishes his mortgage before everyone else can therefore exercise his rights under the mortgage first. If the mortgaged property is sold, it may receive the proceeds of the sale as a priority, before the creditors whose mortgage was issued after its own and before the ordinary creditors (that is to say, persons who have no mortgage, but to whom the debtor owes money).
For example, Beatrice owns an apartment building. There are two mortgages on this building. The first was created when she borrowed $ 70,000 from her bank. This mortgage was issued five years ago. The second was created when she borrowed $ 5,000 from a credit bureau. This second mortgage was issued two years ago. If Beatrice stops repaying her two loans, the bank can exercise her rights under her mortgage before the credit agency. For example, the bank may decide to sell the apartment building, regardless of what the credit agency would have liked to do (for example, take the apartment building and administer it).
What can a debtor do to prevent the creditor from exercising his rights under the mortgage?
A debtor has two options if he wants to prevent the creditor from exercising his rights under the mortgage:
- He can repay the creditor all of his debt.
- He can remedy the situation which results in him being in default (see the question “When is a debtor considered to be“ in default ”?”).
In both cases, the debtor must also reimburse the creditor for his costs. A debtor can use either of these options at any time after the creditor has taken possession of the mortgaged property to administer it. If the creditor has instead decided to take the asset as payment, sell it or have it sold, the debtor can only exercise these two options before taking in payment or selling the asset.
Of course, the debtor can always try to negotiate an additional period with the creditor or convince the latter not to exercise his rights under the mortgage, against a partial payment of his debt, for example.
Finally, remember that the creditor may be required to prove to the court that his debtor has indeed breached his obligations. It is not enough to register a notice to trigger the rights provided by the mortgage. This means that the debtor who considers that he has respected his commitments, can very well contest the demand of his creditor.
What happens when the obligation secured by the mortgage ends?
The mortgage also ends.
For example, Richard gives a mortgage on his house to the bank to secure a loan. Once Richard has finished paying it off, the mortgage lapses because the bond it secures has lapsed.
However, even if the mortgage no longer has legal existence, it still remains registered in the land register or in the RDPRM. This is why it is important to publish (record) the document confirming the end of the mortgage (discharge, release, etc.)
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This document, produced by a land surveyor, illustrates the current state of a property and provides essential information about it.
Who should provide and pay for this certificate?
The standard is that the seller provides the certificate of location. This norm is standard in most purchase offers found on the market, and notably in those of the OACI (Organisme d’autoréglementation du courtage immobilier du Québec): “The seller will provide the buyer with his title of acquisition as well as a certificate of location describing the current state of the immovable and, if applicable, reflecting any cadastral renovations; any new certificate will be at the expense of the buyer if it does not reveal any modification in relation to the previous certificate.”
Why should I order a new certificate of location?
The certificate of location must demonstrate the current state of the property. Although each case is a specific case, it is possible to note that the following events require the production of a new certificate of location:
- The sale of a portion of land since the old certificate of location,
- The old certificate of location states that the building is under construction ,
- The extension of the building or of an outbuilding (eg: terrace or balcony),
- The addition of a garage, swimming pool, shed (not mobile), etc …
- A subdivision or new numbering of the building.
- The cadastral reform made all the old certificates obsolete
Other situations may justify the request by the acting notary for a new certificate of location.
If there is no change, the certificate of location is good. For minor changes, it is always possible to have the certificate accepted by your creditor or the purchaser of your property, but for the latter, this is at its sole discretion. The purchaser is always entitled to obtain a certificate which reflects the exact situation of the property.
How long is the certificate valid for?
To consent to a new one mortgage , some creditors require a new certificate of location if it is more than 5 years old. It depends on the institution, the banker, your file and the buyer. If your banker tells you that the notary will decide on the validity of the certificate, know that the latter will apply the most severe standard of the financial institution and the order of notaries.
Title insurance
Finally, most financial institutions now accept that the customer takes out title insurance (cost between $ 130 and $ 300) rather than having a new certificate made. However, it is important to be well informed about what this insurance covers and the relevance of it.
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It is tempting for many sellers to temporarily withdraw from the market during the holiday season and wait until after New Years to display their property again, once the holidays are well and truly behind them.
This strategy works well for sellers who may have other obligations and may not be as engaged in selling their property while on vacation. Granted, there are plenty of distractions – parties, family obligations, and an endless to-do list. But if you’re motivated to sell, staying in the market during the holidays can pay off.
The end of the year usually sees a downturn in the real estate market. For motivated sellers, that means less competition. Once the New Years has passed, there will likely be an inventory tidal wave of all the sellers who were waiting to list their property. Take advantage of the lack of inventory this season to make your property stand out and attract your ideal buyer. The holiday season can represent unique opportunities to sell your property quickly if you take the right steps.
Competitive Price : A sure way to set your property apart from the competition is to price it correctly. The market is incredibly price sensitive. Even a slight overvaluation of a property can result in a loss of momentum and interest and many more days on the market. If your goal is to sell quickly, then overpricing is not a good strategy.
There may be fewer actively researching buyers in the market during the holidays, but a greater proportion of these buyers will be serious buyers who make their home search a priority. Work with your agent to develop an appropriate pricing strategy that works for you and will grab the attention of potential buyers as well.
Make your property shine: Make sure your property looks its best. This is the golden rule no matter what time of year you are going to list your property, but it can be especially difficult during the holiday season. Out of town guests, holiday and winter decorations can all present challenges in keeping your property in presentable condition.
Mood lighting, a crackling fire in the fireplace and holiday decorations can make a property inviting and attractive, but only if they have been executed correctly and tastefully. Think classic and minimal. Going over the line with inflatable holiday lawn ornaments, too many multi-colored or flashing lights could be a major distraction for shoppers. Doing less is more.
Decorate strategically, organize yourself and make a plan so that you can easily and without much effort keep your property ready for a last minute visit request.
And if you are putting your property on the market for the first time, you may want to refrain from making any holiday decorations altogether, or temporarily removing them for the photoshoot. Besides the price, having great photos is one of the most important ways to showcase your property and gain the attention of potential buyers.
A few extra decorations on the mantel or a wreath on the banister can probably be overlooked in person, but they could be an irritant in your property photos and distract buyers and prevent them from noticing the most selling and impressive aspects. of your property.
Be flexible: The best way to sell your property while on vacation is to be flexible and make your property easy to view and be available. It may be easier said than done, but it’s important to keep your end goals in mind. You’ve already done the work of getting your property ready for sale over the holidays, but if you don’t keep a schedule flexible enough to allow buyers to view it, it will be a wasted effort.
Buyers looking during the holiday season are often more serious and more motivated to buy and close quickly. Buyers and sellers can take advantage of tax incentives to close the deal before the end of the year. Although you should speak with your tax advisor regarding your personal tax situation.
Selling while on vacation also allows you to reach out-of-town buyers who may only be in town for a short time, hunting down properties while on vacation, or visiting family. The schedule during the holidays can be difficult, so the more flexible you can be in showing buyers, the better the chance of a successful sale.
Finally, for serious sellers, listing your property during the holidays has obvious advantages. Fewer listings means less competition, and shoppers looking during the holidays tend to be more motivated and ready to close quickly.
Prepare for a successful quick sale of your property this holiday season. Competitive pricing to attract buyers, make your property shine (less is more), be flexible about planning so you can show potential buyers around and keep your goal in sight. Because, ultimately, what better way to start the New Year than with a fresh start and the successful sale of your property?
And you, when did you think you would sell or buy? were you wondering when is the best time?
www.emmanuelpaquin.ca
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In two weeks, the world has changed dramatically. We are now faced with massive shutdowns and shutdowns, cancelled sports seasons, stock market crashes and fights in the aisles of Costco over toilet paper… COVID-19, or Coronavirus, has affected everyone internationally in one way or another. But will the fallout from this global virus eventually affect the Quebec real estate market?
Yes, it does.
But exactly how? For the moment, no one knows for sure.
There are several scenarios that could play out in the real estate market over the coming weeks and months. With panic and uncertainty in the market, buyers and sellers need to look at the facts and figures to determine if this is a good time to buy or sell.
In March alone, the Bank of Canada reduced the policy rate to 0.75% and the five major banks reduced the prime rate, which is the main benchmark on which mortgages and variable rate lines of credit are based, by 1%. The Office of the Superintendent of Financial Institutions (OSFI), the federal banking regulator, had also planned to recalculate and reduce the qualifying rate for mortgages, but has now put that plan on hold.
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| Image by Nattanan Kanchanaprat from Pixabay |
The market could become even more aggressive.
There is no doubt that the real estate market in the Montreal area has a low inventory of properties for sale. The Greater Montréal Real Estate Board reports that the median price of a single-family home on the Island of Montréal increased by almost 24 per cent, or $571,800, in the last year. A month ago, this increase was 8%, or $526,800.
In January, the average time to sell a property was 71 days. In February, this figure rose to 59 days. As of March 20, this has been reduced to 56 days for the current month.
The market is still very active in Montreal.
Buyers are looking at record sales prices in the Greater Toronto Area and deciding to invest in the Montreal market, where real estate is relatively cheaper. At the same time, there are fewer sellers putting their homes on the market for various reasons. This creates a pressure on the market that is to the advantage of the seller.
But what if these vendors decide that there is no urgency to sell and decide to wait until the Coronavirus is behind us? Fewer homes on the market with the same number of buyers could cause an even worse housing frenzy.
As a real estate broker in the area, I tend to believe that the high-end, $700,000+ home segment will gain market share over the other segments. For the first quarter of 2020 alone, this segment accounted for 31 percent of home sales, compared to 26 percent in for the same quarter in 2019. Buyers in this segment who are considering selling their homes this year may want to do so during the spring rush.
The market may also be flooded with supply and there will be fewer buyers.
An alternative scenario could be that sellers believe we are in a recession and rush to put their homes on the market in anticipation of falling prices. After all, the Montreal market has gone up quite a bit and it’s always good to sell at a high price.
At the same time, buyers may decide that going out in public for open houses and tours could expose them to coronavirus and may decide to put their home search on hold for a few weeks. If supply increases and demand decreases, prices will fall rapidly and the competitiveness of the current market will take a breather, making it easier for buyers to access the home of their dreams.
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| Image by mohamed Hassan from Pixabay |
Or a balance can be established, a status quo.
We will most likely see a combination of these two scenarios as we enter the spring market – the traditionally strong time for home buying and selling. There will be an increase in the number of vendors and continued demand from local and outside buyers. As a result, the market will likely move at a more balanced and reasonable pace than in recent months.
One of the most important things to consider is the experience of a local real estate broker who follows the market closely. If you are selling, a proper marketing plan is necessary to maximize your selling price in the current market. If you’re buying, you need to have an idea of neighborhood trends, potential buying strategies and strong negotiators working for you.
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| Image by Peggy und Marco Lachmann-Anke from Pixabay |
Real estate is not only a career for me, it is also a passion. That’s why I follow the market closely. It will be my pleasure to assist you in your efforts, from start to finish, by providing you with all the information and tools you need to achieve your selling or buying goals in a rapidly changing market.
*Sources APCIQ.com
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