Private Sales Can Be Costly!!

Mortgage fraud in Canada is estimated to range in the hundreds of millions of dollars in losses. Mortgage fraud in private sales contributes to be the problem.So lenders are grappling with a variety of precautionary measures. In mortgaging private sales, here are some due diligence approaches being used: 1. A Lender May Require Default Insurance. Recently one couple who bought a home privately had the required 20% down payment to quality for a conventional mortgage, eliminating the need for default insurance. Yet the lender insisted the mortgage be insured through CMHC. A $3,280 premium was added to the mortgage and payable monthly cat the same interest rate, adding to the monthly cost for the mortgage 5-year term. On renewal, the balance on the insurance portion will stay with the mortgage until fully paid. As well, the insurance premium is subject to provincial sales tax, adding to the closing costs. 2. A lender may require two appraisals. As explained, when a home is listed, presumably a licensed real estate person has evaluated the home and the property’s list price can be verified through ML350) are typically borne by the buyer. 3. Another lender may not accept private sales but will look at them on an exception basis. “All documents must be provided up front and those deals are reviewed at the management level.” Buyers need to have perfect credit (no blemishes), with stable employment” and the property must be very marketable. 4. Still another lender, among the things, requires the following, a reason why, if the purchase is not arm’s length: how the buyer knew about the house for sale; location and determination of marketability of property; a full appraisal with each application and further searches for property values and verifications of registered ownership.