This is definitely a significant change and one that should be considered when looking for mortgage financing with TDCT. TDCT quietly changed their standard mortgage clauses earlier this year and without much fanfare..until now.
The changes are in regard to variable rate mortgages and may place a homeowner in a precarious position should property values fall. Here is how it basically works.
If you are obtaining a new conventional mortgage (20% as a downpayment) with TDCT that has a variable rate then keep in mind that TDCT’s new clauses read as follows:
- If at any time the outstanding Principal amount (including and deferred interest) exceeds 80% of the fair market value of the mortgage property as determined by us (with or without an appraisal/valuation), (such amount being the trigger point), we will give you notice of such excess (the trigger point excess) and with 30 days of receiving that notice you must do one of the following:
- make a lump sum payable to us at least equal to the amount of the trigger point excess; or
- satisfy us that the outstanding principal amount (including any deferred interest) does not exceed 80% of the fair market value of the mortgaged property as established by a qualified real estate appraiser approved in writing by us, but at your expense.
If you are obtaining a high ratio mortgage (less than 20% as a downpayment) with TDCT that has a variable rate, then the new clause is as follows:
- If at any time the outstanding principal amount (including any deferred interest) exceeds greater than 105% of the original advance amount (the trigger point), you must do one of the following:
- pay us a lump sum to reduce the outstanding principal amount by an amount at least equal to the amount of the trigger point excess; or
- agree with us to convert the mortgage loan to a fixed rate mortgage loan or;
- increase the amount of each regular principal and interest payment to an amount sufficient to amortize the outstanding principal amount (including deferred interest) over the remaining amortization period, we will give you notice of such excess (the trigger point excess) and within 30 days of receiving that notice you must do one of the following: If you do not do what is required above, we have the option of demanding repayment in full of the outstanding principal amount ) including deferred interest), plus unpaid interest, costs, charges and expenses that you owe to us under this agreement and enforcing our remedies under the mortgage.
Not sure how this will be policed but we will see as time goes on and if and when property values shift downwards. The bottom line is to make sure you fully understand what you are signing and the implications that these restrictive clauses may have to you and your family. For more information please feel free to contact me.
Kim Gibbons, ” Your Mortgage Superhero ®”
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