May 3rd, 2016
There are two ways to register a mortgage on title: Standard Charge and Collateral Charge. At one point in time, all lenders were registering their mortgages as Standard Charge however over the last 6 years, an increasing number of lenders - mainly the major big banks - have been moving towards Collateral Charges.
Choosing the right mortgage that suits your current and future needs will ultimately save you money (and hassle) when you least expect it. It has never been more important to understand and recognize the major differences between the two types of charges/liens.
One of the major differences which impact the borrower the most is that a Collateral Charge mortgage is non-transferrable to another lender at the time of renewal. This means you will have to start on a clean slate and pay legal fees to register a new mortgage if you choose to switch to another lender. Legal fees typically range from $600.00 to $1,000.00 depending on the legal provider.
Another major difference is that a Collateral Charge mortgage is registered at 100% to 125% of the property value as opposed to the amount you are borrowing. This can be beneficial to some borrowers as it makes it easier to access the home equity for renovations, investments, or debt consolidation without incurring legal fees.
However, tapping into too much of the equity will limit your options when shopping for a new mortgage at renewal.
With a Standard Charge mortgage, there are options to renew/switch to another lender without incurring legal fees. This is a huge advantage as it leaves you open with options and provides you with the leverage needed to effectively negotiate for competitive renewal rates with the current lender.
Also, the mortgage is registered for the original amount you borrowed so to access equity at a later date would involve requalifying and some fees.
Shopping for the right mortgage can be overwhelming and it is our duty to assess the situation at-hand and offer on the most appropriate solution for your needs.
Please contact us for free consultations and more info on how we can help you!