WHAT IS AN INSTITUTIONAL MORTGAGE?
An institutional mortgage may refer to a mortgage that has been issued by a financial institution as defined by the Bank Act, a trust corporation, a pension fund, or an insurance company. Institutional lenders are regulated by the federal government and may include banks, trust companies, and loan companies. The Office of the Superintendent of Financial Institutions defines a loan company as a financial institution that operates under either provincial or federal legislation and conducts activities similar to a bank. Such loan companies are regulated by the Trust and Loan Companies Act. Examples of loan companies include CIBC Mortgages Inc., Scotia Mortgage Corporation, and TD Mortgage Corporation.
Institutional lenders typically have strict requirements before they will approve a borrower for a loan. Examples of what an institutional lender may require before approving a mortgage include the borrower meeting a minimum annual income, an appraisal of the real property, a home inspection, obtaining title insurance for the property, obtaining fire insurance, and having a good credit history. These reassurances make the loan less risky for the lender, which allows them to offer lower interest rates when compared to a private mortgage.
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Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.