Collateral charge mortgage

N1208P63001CThere has been a lot of talk lately about mortgages in general. Thanks to the power of the internet, consumers are more informed than ever about the choices that are available for financing their home or investment property. Consumers are now also learning the importance of working with a professional when it comes time to negotiating a mortgage. Let’s talk mortgage charges. Do you know how your current mortgage was registered? Is it a standard or collateral charge? Do you know the difference?

What is a collateral charge mortgage?
A collateral charge mortgage is a different way to secure a mortgage or loan against your property. 
They allow lenders to change interest rates and/or lend more money without the client incurring further legal fees. Sounds great right? Well, there is a downside. Other lenders won’t accept transfers from borrowers with collateral charges. Borrowers must discharge the existing mortgage and refinance which means incurring legal costs that would not otherwise be associated with switching lenders when you have a standard charge mortgage. 
There are a few major banks and a number of credit unions that register all mortgages as collateral charges.

Does it ever make sense to get a collateral charge mortgage?
Borrowers who know they may want to access more of their home’s equity in the first few years of the mortgage could consider this type. A collateral charge will allow for more convenient access to additional equity, without incurring legal fees again.

Important facts to know about collateral charge mortgage Pros • Easier to access equity when your property increases in value • Withdraw home equity without refinancing • Good product if you want to consolidate debt or use your equity for renovations or investments Cons • Difficult to switch to another lender upon renewal, legal fees may apply • Limits your ability to easily move between
lenders for better rates and product features Take the time to discuss your mortgage with a Mortgage Broker; a dedicated professional, specializing in guiding you to the perfect mortgage to suit your needs and lifestyle.

– Written by Andrea Sammut, Licensed Mortgage Agent 
at Mortgage Architects Brokerage #10287 located in Orangeville, Ontario