What is a disclosure statement?
- Definition of Disclosure Statement
A disclosure statement is a document that an individual will receive t0 outline official credit terms, conditions and interest rates. Disclosure statements are given when a loan, such as a mortgage or a credit card, are disbursed to the borrower.
Why is this term important?
A disclosure statement, in the case of loans, will outline the official credit terms, the amount of money that is borrowed and what the repayment schedule will be over the life of the loan (also known as the term of the loan). A disclosure statement will also list whether you need insurance and what type, whether prepayment is allowed and other expectations set forth by the lender.
Disclosure statements are legal documents or agreements that are sealed once they have been signed. Disclosure statements are important because they provide the borrower with all of the information they'll need about their loan. The document is written in plain language to allow the borrower to understand all of the obligations they are required to commit to during the time of repayment. Federally regulated in Canada, disclosure agreements must be easy to understand, included in the loan agreement, or provided to you before final signatures are received.
Quite often, there is another type of disclosure document that can be confused with a disclosure statement. A property disclosure statement, known as a PDS, is a signed statement from the seller to the buyer that lists all necessary facts and information known to the seller about the property. These facts can be related to the condition of a home that can not be seen upon observation. A buyer may choose to ask the seller to provide a property disclosure statement (PDS), however, this document is not required in every province.
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