# Mortgage & right of survivorship questions



## Mclaren_F1 (Dec 19, 2013)

Hello,

I need some help/advice for my parents as they don't have much a clue on finances (no disrespect to them) including myself. They are getting a 2nd mortgage to pay off a previous loan and from the mortgage commitment, it states the mortgagee has the right of survivorship. Can someone elaborate on what this means? 

I looked it up and from what I understand it is a joint tenancy and when one party dies, their interest in the property is given to the other owner and the "last man" standing gets everything, which prevents heirs from making claims against the property. I'm not too familiar with this concept but does that mean worst case scenario the mortgagee will get my parents' entire estate or just the amount that is owed to him from the loan? What is the process of this exactly? To me it sounds like a total rip off and an attempt to take more than what is owed but like I have mentioned I'm not knowledgeable on this, so any help/insight would be appreciated.

Also I don't see use in getting a mortgage to pay off a previous loan as the terms are almost exactly the same but they will pay off the current loan sooner. My parents signed I believe was the mortgage commitment but have yet to sign the main contract in front of the lawyer to get it notarized. Would they still be able to back out? I would assume there will be penalties involved, if so what would be typical in this situation?

Thanks for any help


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## Arshes76 (Jul 5, 2013)

Best to my knowledge it means if the home is owned jointly, the ownership automatically transfers to the other owner. Usaually this is between 2 spouses, who want the husband/wife to have the home when they pass away.

_"does that mean worst case scenario the mortgagee will get my parents' entire estate _" Do you mean the mortgage holder (ie the bank) will receive the home when both owners die? No, pretty sure that doesnt happen. Even during a foreclosure, after the home is sold, the bank takes what they're owed and the rest goes back to the owner.


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## MRT (Apr 8, 2013)

that clause just confirms that the mortgage is attached to the property and survives the passing of any owner(s). The lender is only entitled to the outstanding principle balance (+ accrued interest).

"Joint tenancy" refers to ownership structure (it has nothing to do with the mortgage). Under joint tenancy, no one owns a % share of the property; the property is jointly owned by all parties to the deed. If one owner passes away, then others automatically remain joint owners of the entire property. 

"Tenancy in common" is the other ownership structure, whereby each owner does own a % share of the property (you can specify that however you like on the deed - 50/50, 75/25, 49/49/1/1, etc.) and when one owner passes, their share of the property falls to their estate rather than to the other owners.

In either case, the owners are all responsible for the mortgage being paid. The lender does not care about the ownership structure, who amongst them actually pays the mortgage, etc. If an owner passes away, it is essentially irrelevant to the lender so long as payments continue to be made. It is up to the surviving owners to continue to pay the mortgage or else sell the property to pay it out.

A signed commitment (contrary to its name) usually does not commit them to anything and they should be able to back out without any cost (the exception is some shady brokers who charge a 'brokerage' fee, which is a total scam since they are fully compensated by the lender - NEVER pay a brokerage fee for a mortgage!).

Also, it should not be necessary to replace the mortgage with a new one, if the terms are essentially the same, if the goal is simply to pay it down more quickly. Almost all lenders allow borrowers to both increase their payment and to make lump-sum payments, which both serve to lower the remaining amortization period. Check with the current lender before incurring any penalties to pay it out.

disclaimer: this is my understanding from ~15 years of prior work experience both with a real estate law firm and a major lender. I encourage you to speak with a lawyer (or their real estate clerk) to obtain sound legal advice. If your parents are taking out another mortgage, it generally needs to go through a lawyer (or the lender's legal service provider, or notary in some provinces) and they should be able to answer any questions you have too.


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## Mclaren_F1 (Dec 19, 2013)

Thanks for the help Arshes and MRT, it really helped clarify things. I do get a bit paranoid when it comes to finances but I guess it's better to be on the safe side when it comes to these things. 

Enjoy the rest of your holidays :very_drunk:


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## dougbos (Jun 4, 2012)

The comment above that the second mortgage would be attached to the title and the heir will need to continue paying it or pay it out to remove it from the title is correct.
I would like to comment on brokerage fees. If you have excellent credit and income you would have no problem getting a first from an A lender. The mortgage agent would be paid directly by the lender. However poor credit applicants and second mortgages are a different story. In this case a lender may or may not pay a mortgage agent. In some cases the payment is so small or a second mortgage is so low that a mortgage brokerage fee is added on. If you have a pet and go to a vet you pay for the office visit. You have to go back for a followup and in most cases even if it is only 5 minutes you will still pay for an office visit as the vet is running a business. The same is true for a mortgage brokerage. 
If your credit state is so poor that the only source for a mortgage is a private mortgage then you will definitely pay a fee and it could be quite high depending on the lender. In this case the lender controls the deal. If you want the mortgage you pay the lending fees. For some it may be the last resort. Perhaps through illness or a plant closing a person has lost their job and income. If they fall behind on on the mortgage payments and property taxes the lender may go for a power of sale. A private mortgage would be the only way to stop it.
Credit worthy applicants should not be charged a brokerage fee. For those requiring a second, depending on the source, there may be a fee. With a private mortgage there will be a fee. It is up to the applicant to ask if there will be fees and then decide whether to go ahead. A honest agent will discuss this upfront as part of the mortgage application process and not spring it upon them at the last minute.


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