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Mortgage Buydown Agreement Template for Canada

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Key Requirements PROMPT example:

Mortgage Buydown Agreement

"I need a Mortgage Buydown Agreement for a 2-1 temporary buydown on a new construction property, where the builder will contribute the buydown funds to reduce the effective interest rate from 7.5% to 5.5% in the first year and 6.5% in the second year, with the agreement to take effect March 1, 2025."

Document background
The Mortgage Buydown Agreement is a specialized financial instrument used in Canadian real estate transactions to facilitate more affordable mortgage payments for borrowers. This document becomes necessary when a third party (such as a property seller, builder, or other entity) contributes funds to temporarily or permanently reduce the effective interest rate on a borrower's mortgage. The agreement must comply with Canadian federal banking regulations, including the Bank Act and Interest Act, as well as provincial property and consumer protection laws. It outlines the structure of the buydown arrangement, specifies how the contributed funds will be applied to reduce mortgage payments, and details the obligations of all parties involved. The document is particularly relevant in new construction financing, competitive real estate markets, or when sellers need to provide incentives to buyers. The Mortgage Buydown Agreement includes specific calculations for the reduced payment schedule, provisions for fund management, and terms for what happens if the mortgage is terminated early.
Suggested Sections

1. Parties: Identifies all parties to the agreement, including the borrower, lender, and any third party providing the buydown funds

2. Background: Explains the context of the mortgage buydown arrangement and the purpose of the agreement

3. Definitions: Defines key terms used throughout the agreement, including specific mortgage and buydown-related terminology

4. Buydown Structure: Details the specific structure of the buydown, including the initial rate, buydown periods, and rate adjustments

5. Buydown Funds: Specifies the amount of buydown funds, who is providing them, and how they will be held and applied

6. Payment Terms: Outlines the payment schedule, including the reduced payment amounts during the buydown period and subsequent adjustments

7. Lender Obligations: Details the lender's responsibilities in administering the buydown and applying the funds

8. Borrower Obligations: Specifies the borrower's responsibilities and acknowledgments regarding the buydown arrangement

9. Default Provisions: Addresses what happens in case of default or early termination of the mortgage

10. Term and Termination: Specifies the duration of the buydown arrangement and conditions for early termination

11. General Provisions: Standard contract clauses including governing law, amendments, notices, and entire agreement

Optional Sections

1. Third-Party Funding Provisions: Required when the buydown is funded by a third party such as a seller or builder, detailing their obligations and payment terms

2. Escrow Requirements: Needed when buydown funds are held in escrow, specifying the terms of the escrow arrangement

3. Property Sale Provisions: Required when the buydown agreement includes provisions related to the sale of the associated property

4. Government Program Compliance: Necessary when the buydown is part of a government-sponsored program, ensuring compliance with specific requirements

5. Builder Warranties: Required when the buydown is provided by a builder as part of new construction financing

6. Assignment Provisions: Needed when the agreement allows for assignment of buydown rights or obligations

Suggested Schedules

1. Schedule A - Buydown Calculation Table: Detailed schedule showing the calculation of buydown amounts and payment schedules over the buydown period

2. Schedule B - Payment Schedule: Comprehensive payment schedule showing regular payments, buydown amounts, and effective interest rates

3. Schedule C - Original Mortgage Terms: Summary or copy of the relevant terms from the original mortgage agreement

4. Schedule D - Source of Funds Declaration: Declaration form detailing the source of buydown funds for compliance purposes

5. Appendix 1 - Required Notices: Copies of any required regulatory notices or disclosures

6. Appendix 2 - Buydown Fund Release Authorization: Authorization forms for the release of buydown funds according to the agreement terms

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions


































Clauses
























Relevant Industries

Banking & Financial Services

Real Estate

Construction & Development

Mortgage Lending

Legal Services

Property Development

Financial Technology

Relevant Teams

Legal

Mortgage Operations

Real Estate Finance

Compliance

Risk Management

Credit Analysis

Property Development

Transaction Processing

Customer Relations

Documentation

Relevant Roles

Mortgage Broker

Real Estate Lawyer

Banking Officer

Loan Officer

Real Estate Agent

Property Developer

Financial Advisor

Mortgage Underwriter

Compliance Officer

Real Estate Transaction Manager

Construction Finance Manager

Treasury Manager

Risk Assessment Officer

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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