FAQ

The Bank Rate is the rate at which the Bank of Canada lends funds to financial institutions.
The Prime Rate is the interest rate charged by financial institutions to their customers.  The prime rate is set by each individual financial institution.

When the Prime Rate changes, the new rate becomes effective on the 1st of the month following the rate change, unless the rate changes on the 1st of the month, in which case the new rate becomes effective on that day. Prime Rate and payment change notification letters will be mailed to all customers shortly after.

To ensure there are enough funds in your account to pay next year's full tax balance, we collect taxes from the first installment of the final bill to the final bill of next year. If your mortgage is funded during this period, you have two options.

We will then collect the regular tax payments until the next tax installment is due and beyond.

If applicable, you can be responsible for the next upcoming bill after your mortgage closes. We will then collect the regular tax payment.

Within 30 days following the final bill being issued your tax payment will be automatically adjusted to reflect the following year's taxes. If you would like to be added to our convenient and simple tax payment program please contact us at 888.488.0794 or send an email to escrow@firstnational.ca.

1. We can divide the full tax balance payable by the number of months remaining until the first installment of the final bill.
   
2. We can deduct on funding a sum equal to the total of the tax payments from first installment of next bill upcoming after your mortgage closes.

Because the details on every mortgage are different, property tax start dates vary with every customer.  Typically, the start date is dependent on when your taxes are due to the municipality.  Please note:  that any taxes that are due prior to your Tax Start Date, will be your responsibility.

Below is an example of when First National will start paying your property taxes.  For further information on your property tax payment, please refer to the “Realty Tax Form” which was signed upon the closing of your mortgage.

Example:
If your Ontario mortgage closed in November 2008, you would be responsible for your 2008 property taxes in addition to your Interim 2009 tax bill.

If your Ontario mortgage closed in September 2008, you would be responsible for your 2008 property taxes, and First National will collect for your 2009 property taxes and any taxes thereafter.

A tax deficit occurs when there is a balance owing on your property tax account. There are a number of ways that a tax deficit can occur:

Incorrect property tax estimate
This occurs when the tax estimate on your property was estimated incorrectly.  If this is the case, then First National has not been collecting enough to cover your tax bill and a tax deficit will have occurred.

Unexpected tax bill
This occurs when First National must pay for a tax bill on your behalf that was your responsibility.   If there was a property tax bill owing that we were not aware of, your current payment would not have reflected the additional amount owed to your municipality and your tax account will have a tax deficit.

Your property is ‘Not Yet Assessed’,
If your property is ‘Not Yet Assessed’, the tax payment is calculated using the same estimated value of your property that was used at the time of funding. Once your Supplementary Bill has been received, your payment will be adjusted to reflect your correct tax payment.

If there is a deficit on your tax account, your payments will be adjusted once the final tax bill has been received.

First National offers a number of prepayment options including:

15% Lump Sum Payment
You can pay up to 15% of your original mortgage balance each year on any of your regular payment dates. There is a minimum prepayment amount of $100.

15% Payment Increase
Once per year, you can increase your payment amount by up to 15%. The increased amount will go directly towards reducing your principal balance. Some exceptions apply, so you will need to review your mortgage documents.

Double Up Option
On any regular payment date, you can "double up" on your payment of principal and interest. The full amount of the extra payment is applied directly off the principal of your mortgage. Each of these options are non-cumulative, meaning they cannot be saved up.

Changing your monthly payments to accelerated bi-weekly or accelerated weekly payments can save you thousands of dollars in interest over the life of your mortgage.

Your payment frequency can be changed once every 12 months during the term of the mortgage free of charge. If more frequent changes are required, they can be made at a cost of $50 per change.

With changes, there is an obligation to pay the accrued interest if the mortgage payment date is adjusted. The accrued interest is calculated on the number of days between the original payment date and the new payment date. First National requires 3 business days notice prior to your next payment in order to make any changes.

If you are changing your payment frequency or moving your payment due date, then an interest adjustment may occur for every day you move your payment date forward from the date of your last payment.

Because the interest calculated is based on your previous payment date, the additional days you move your payment date forward are not included in your principal and interest payment and an interest adjustment will occur

If you would like to pay out your mortgage before the end of your closed mortgage term, a prepayment penalty for an early discharge will apply.

As stated in your mortgage documents, the prepayment penalty for an early discharge is the 3 months interest on your mortgage or the Interest Rate Differential (IRD), whichever is greater.

The 3 month penalty is calculated by taking the balance of your mortgage, multiplied by the interest rate and dividing it by 4.

IRD is a more complex calculation that calculates the difference between your current interest rate, the outstanding term and the reinvestment rate for the length of time remaining on your mortgage.

Example:
Balance on mortgage: $200,000 
Interest rate: 5.5% 
Remaining term: 4 years and 2 months (4.16 years)

Three month interest penalty
$200,000.00 (balance) X 5.50% (interest rate) / 4 = $2750.00

IRD penalty
Current interest rate: 4.45%
Interest rate difference: 5.5% (your interest rate) – 4.45% (current interest rate) = 1.05%

$200,000.00 (balance) x 1.05% (interest rate difference) = $2100 x 4.16 (term remaining in years) = $8736

In this example, the IRD is greater and you will be charged the IRD penalty for an early discharge.

The Interest Rate Differential (IRD) is essentially the difference between the interest you would have paid
over the balance of the term of your mortgage and the interest we can earn if we reinvest the money you
prepay in another mortgage.

In making the calculation, we factor in that we are receiving your money today rather than in the future, and we assume that your money will be reinvested in a similar mortgage product at the lowest advertised interest rate (which may not be our “posted” rate) offered for that mortgage product at the time of prepayment. We also assume that the term of the mortgage will be the term closest to and shorter than the remaining term of your mortgage offered by us for that mortgage product.

Prepayments of principal may be made on any regular payment date as set out in your mortgage schedule. However, you cannot combine your prepayment privilege with the payout of the mortgage on the same date, even if the payout date is a regularly scheduled payment date.

Example:
You plan on discharging your mortgage on June 30^th and your upcoming regular payments are scheduled for: May 31^st, June 15^th and June 30^th.
You may make a prepayment on May 31^st and June 15^th , prior to the payout of your mortgage. You cannot make a prepayment on June 30^th the day of your payout.

* Please refer to your mortgage documents for additional details.

When discharging a mortgage, the balance in your mortgage account must be paid to zero. 

Included in the amount owing are:

• The balance on your escrow accounts
• Prepayment penalty
• Administration fee (approx $320.00) – charged for the preparation of the discharge and closing of the mortgage file.  Note: administration costs will vary slightly by province.

The actual number of years it takes to repay a mortgage in full is the amortization period. There are two ways to reduce your amortization

1. Increase your payment frequency. Make your mortgage payments on an accelerated weekly or bi-weekly basis instead of once per month.
2. Increase your payment amount. This will decrease the amortization period resulting in substantial interest savings over the life of your mortgage.

Refinancing your mortgage allows you to tap into your home equity to perhaps help consolidate your debts or finance a home renovation. When you refinance your mortgage, you have two options:

	Keep your existing mortgage and add additional funds	Pay off your existing mortgage and receive a new mortgage with the new funds at today’s rates
What it means	You will keep your current mortgage amount at your current rate and any additional funds to your mortgage will be calculated at current mortgage rates.	To take advantage of today’s lower rates when you refinance, you can pay off your existing mortgage and replace it with a new one at today’s rates.
Interest Rate	Blended Rate (Fixed terms only)	Today's current rate
Prepayment Penalties	None	3 month penalty or Interest Rate Differential (IRD)
Amortization	Can be changed from your original amortization	Can be changed from your original amortization
Term	No extension in the remaining mortgage	Terms available from 6 months to 10 years
Re-qualification required?	Yes	Yes

When you renew your mortgage early, you are renewing your mortgage term and rate prior to your current term’s maturity, keeping the mortgage amount and amortization the same. Because you are renewing your mortgage prior to the maturity of your current term, you are breaking your mortgage contract and prepayment penalties will occur.
(See Question 9).

An online quick application can be completed on this website or, contact us and speak with one of our Mortgage Specialists at 1.888.670.2111. You may need to provide proof of income or have an appraisal done if your needs or circumstances have changed since you received your initial mortgage.

The first step is for you to qualify for the new property. You can do this by completing our
online quick application or by contacting our Mortgage Specialists at 1.888.670.2111.

The purchaser must complete a mortgage application and provide confirmation of income and employment suitable to First National Financial LP. Purchasers can apply on our website or by phoning our Mortgage Specialists at 1.888.670.2111.