**A couple of weeks ago, we discussed public servants using their settlement windfall to top up their RRSP, which they could in turn utilize for down payment purposes. At the time of printing that article, there was some question of being able to shelter the whole settlement amount into an RRSP, but the decision was yet to be granted by Revenue Canada. Apparently this has been resolved, and you can now shelter up to $10,000, tax free. The remaining amount will be taxed. Once sheltered, under the "home buyers plan" (HBP), you can borrow up to $20,000 per person from your RRSP to purchase that new home. Of course you must qualify as a first time buyer (see definition on my website under "Sun Articles/buying a new home/home buyer’s plan").

A reader writes to me to ask why his payments were $30 per month higher than when he went to the "mortgage calculator" on my website. The answer has to do with the original question. He was buying a home for $126300, and putting $6300 down. He asked my mortgage calculator to figure the monthly payments on the remaining $120000 (that’s $126300 less $$6300) at 7.25% for an amortization of 25 years. The answer was $859.10. When he went to the bank to get the mortgage, the payment was $891.32, a difference of over $30 per month. The reason is the mandatory CMHC premium for 95% financing. The premium of $4500 is added to the mortgage, thus accounting for the difference in the payment. We are working on the problem and should have it rectified shortly.

Another writer asks about mandatory life insurance from a mortgage lender. As far as I know, no mortgage lender will make it obligatory for you to buy life insurance. It is indeed a good idea to purchase life insurance, especially if you have a young family, but it is not a good idea to buy from the lending institution proper. The reason you should investigate purchasing life insurance from someone other than the lender has to do with ownership of the policy. If you buy your insurance from the mortgage lender, chances are you are not the owner of the policy, the lender is. If you should happen to die within the term of the mortgage, the lender’s only obligation is to payoff the outstanding balance. If you had secured independent life insurance (term insurance), for the original face rate of the mortgage, your estate would receive a cheque for the full amount of the policy. When the estate pays off the mortgage with the proceeds, there may be money left over. If a mortgage lender is insisting on selling you life insurance, you may want to shop elsewhere for your mortgage.

We also have encountered the difference between a building location survey and "title insurance" this week. A client is buying a house in an established neighbourhood. The house and Vendor have been there since 1940. There is an original survey but since it was done in 1940, several changes have happened to the property involving trees, shrubs, fences and the like. The mortgage lender asks for a new survey which would cost about $1000. The purchasers had to struggle to come up with the down payment, that extra $1000 would "break the bank". The solution was "title insurance". This insurance policy protects the lender against any title problem that may come up in the future. The cost of $275 was much less than a new survey.

A new survey would identify problems with title prior to the purchase, which then could be up to the Vendor to solve before closing. Title insurance will protect the lender against title defect after the fact. If you have the money, choose the survey.