Payments, pre-payments and banking changes

What is it?

Payment Date Change is designed to accommodate a Borrower’s cash flow and can occur at any time during the mortgage term. For commercial loans, the payment date can only be changed from the 1st to the 15th of the month. There is an Interest adjustment required at the time of the change to bridge the existing payment date and the new payment date.

Pre-payment penalty is a sum charged to the borrower for paying off a mortgage before the end of its term. The pre-payment penalty clause is stipulated in the Commitment Letter. If pre-payment is allowed, the commonly accepted practice is to charge the greater of the Interest Rate Differential (IRD) or three months of interest.

Banking Info Change allows the borrower to make a change to the account from which funds are debited. To ensure that the new banking information is processed correctly, any banking info change must be provided in writing along with a new Pre-authorized Debit ("PAD") Plan Agreement form with a copy of a void cheque. The borrower can also provide a certified pre-authorized letter from his local bank or credit union branch.

Why is it important?

Payment Date Changes help to ensure that:

The Borrower has increased flexibility to collect rents and payments

Pre-payment Penalty helps to ensure that:

The Lender is protected from loss should the borrower not honor his contract
The borrower is aware of the financial consequences associated with breaking the contract

Banking Info Change helps to ensure that:

Payments are taken from the Borrower's appropriate account

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Financial requirements

On an annual basis, we review financial documents as outlined in the commitment letter to continuously verify the financial health of the property.

Undertaking

Post funding, we work with borrowers to meet the specific milestones and obligations outlined in the mortgage contract.

Insurance requirements

On an annual basis, we verify that all insurance requirements outlined in the original loan documents are being met to ensure adequate coverage for the property.

Property tax

For borrowers that choose to pay their own property taxes, we work in collaboration with the tax department to show proof of timely and accurate payment.

Mortgage information

For both annual accounting and general mortgage management, we provide three key statements including the Annual Statement, Mortgage Information Statement and Amortization Schedule.

Your commitment letter

The commitment is a contract between First National and the Borrower. First National uses this commitment as the source for all decision making throughout the duration of the mortgage amortization period. The commitment covers everything from payment type (fixed, floating, amortizing, interest only), pre-payment parameters, insurance requirements, type of annual review documents to be collected, undertaking requirements, etc.

Why is it important?

It is important to note that the commitment is attached to the mortgage (rather than the borrower) for the entire amortization period.

If the loan is assumed the current Borrower is replaced by the Purchaser of the property.
If the loan is renewed the terms and conditions of the commitment are extended for a new term in accordance with the renewal agreement.
If the loan is refinanced the terms of the existing commitment is discharged and new terms are registered with the mortgage.