Mortgage Mondays: Closing on a Friday could cost you thousands

Most people love the idea of setting their closing date on a Friday. For obvious reasons, it’s nice to be able to take one day-off of work and have the weekend to unpack and settle in at your pace. Unfortunately, convenience isn’t always practical. While most real estate transactions happen on the 1st, 15th or last day of the month, if any of those days fall on a Friday, most lawyers and mortgage brokers will advise you to choose an alternative date; and here’s why:
One of the biggest issues that lawyers face today, has to do with receiving funds from your bank on time (before 2:00pm). Today’s tighter mortgage regulations have put added pressure on lenders, brokers, and lawyers to ensure that your file has been looked over by several people and departments to verify that compliance, quality assurance and fraud prevention checks have taken place. This can sometimes result in a delay of funding as your lawyer may not receive mortgage funds in time to close your transaction successfully. Should this unfortunate event happen to you, it could escalate into a serious matter which could potentially add up to thousands of dollars and leave you with an unexpected lawsuit to deal with. Here are some of the issues that may arise if your closing has to be pushed to the next business day:

Litigation

For whatever reason your transaction does not close, then the sellers whose house you’re buying will not receive their money either, causing them to default on their closing too. This could potentially create a domino effect, with several parties being affected and thousands of dollars in penalties and litigation arising.

Paying interest on money you haven’t received yet

Yes, this happens. Just because your deal did not close, does not relieve you of your obligation to pay. Banks will charge you interest on funds sitting in your lawyers trust account from the time they deposited the funds. These costs could really add up, especially if there’s a condition that has not been satisfied by your lender. It’s best to get an email from your broker several days prior to your closing date that ensures all of your conditions have all been fulfilled. Failing to do so could be the main trigger in the delay of your closing.

Being stuck with a truck full of your belongings

What could be worse than not having access to your personal items for 2 – 3 days? Not to mention the added risk of having your items stolen from you. To top it off, you’re most likely going to incur additional charges for those 2 or 3 days and also be expected to pay a hefty premium.

Paying additional legal fees

We’ve all heard this one before. Simply put, the more work your lawyer has to do, the higher the fees you’re going to pay. A lawyer’s time is extremely valuable and expensive, having them spend their time chasing your bank, realtor, or mortgage broker, and also having to go back and forth with the other parties’ solicitor can cause your fees to add up quickly.

Hotel vs In-Laws

Having to get a hotel, or better yet, asking your in-laws for a place to stay – no need to elaborate further on this topic.

Aside from the cost perspective, the emotional stress of having to deal with such issues is reason enough to consider doing a little home-work on your part to protect yourself from these possible mishaps.

So do yourself a favour, the next time you purchase a property – make sure it doesn’t close on a Friday!

Lionel Khoury, AMP

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