If you’re a looking for a small silver lining in the global pandemic, you’ll find one in the way that COVID-19 inspired faster mortgage closings.
When mass contagion made face-to-face lawyer visits less palatable, virtual closings took off. There’s now a slew of e-lawyers that will close your loan using a Zoom-like interface, without printing a single sheet of paper. Examples include the likes of Deeded.ca, MyClosing.ca, Diamond & Diamond, Axesslaw.com and many others.
Some, such as Ontario’s MyClosing.ca, even let you do everything from a mobile phone app, including signing.
How it works
Most e-closings go basically like this:
1. Once your mortgage is fully approved, your lender sends the paperwork to the e-lawyer of your choice.
2. Your e-lawyer sends you secure access to your personalized online portal.
3. You meet the lawyer online for your scheduled closing.
4. You validate your ID (electronically and by showing your driver’s licence on the screen, for example).
5. You view the documents in a screen-share with the lawyer and ask any questions.
6. Everything is e-signed, which in most cases is as good as an ink signature.
7. The lawyer registers the mortgage with your provincial land titles office.
8. The mortgage funds are disbursed, and away you go.
Unfortunately some lenders and some provinces (eg. Alberta and British Columbia) still require wet ink signatures. How archaic. This and a non-electronic registration system are largely behind the historical backlog and massive delays that Alberta’s land titles office is facing, relative to a 100-per-cent electronic province such as Ontario.
In such cases, and for technology-challenged individuals, face-to-face lawyer meetings may still be a requirement. Although, some semi-virtual lawyers will send a signing agent to your home or office to physically witness wet signatures.
The fees for e-closings vary, but they’re similar those for a traditional lawyer. On a home sale or mortgage refinancing, you’re looking at roughly $899 to $1,049. Closings on purchases cost up to $600 more. These fees often include mandatory lender title insurance, but check with the lawyer to confirm.
Many e-lawyers can close in as few as three days and some of them work weekends.
Eventually, almost all residential mortgages will be closed this way, saving mortgagors loads of travel time and hassle. If you’re an old-school face-to-face real estate lawyer, it’s time to enroll in a new school.
Rates stagnate
The good news is that headline inflation had its first downtick in over a year.
“… It looks like inflation may have peaked,” Canada’s top central banker, Tiff Macklem, wrote in an op-ed in the Financial Post Tuesday.
The bad news is that inflation isn’t going down fast enough. In fact, it’s still broadly increasing in most categories.
That means we can expect at least 100 basis points of additional rate hiking by year-end, say bond traders. It’ll probably take at least that much for the Bank of Canada to nail the coffin shut on inflation.
For the 1 in 15 Canadians with an adjustable-rate mortgage – whose payments change with prime rate – a 100 bps rate hike adds about $56 a month per $100,000 of balance. Not pleasant.
Meanwhile, the prospect of more-than-expected Bank of Canada hikes is keeping five-year rates elevated and sticky. In fact, there was only one minor rate change among all national leaders in the past week. That means those waiting for lower five-year fixed rates – lower than HSBC’s nationally-leading 4.79 per cent (uninsured) offer – will need to wait a bit longer.
And lest we forget what we can’t foresee. Crises can come out of nowhere. If we ever saw something such as China invading Taiwan, for example, mortgage rates could go haywire.
“You might first see a flight to quality similar to 9/11 or any period of uncertainty/market stress,” says Hugh Sutcliffe, Managing Director, Hedging and Capital Markets at Chatham Financial. That would drive down bond yields, at least temporarily, but we’d potentially see a surge in perceived credit risk and/or inflation expectations, which might temporarily drive mortgage funding costs to the moon.
The takeaway is that predicting the future is hard. If you’re financially strong and risk tolerant, it makes sense to play the likely odds and keep floating in a deep discount variable. If you absolutely can’t stomach rate volatility and won’t need to break your mortgage during the term, lock into a sub-5-per-cent for longer (at least two to three years). Or consider hedging part of your rate exposure with a hybrid – part fixed and part variable.
Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.
