Hi, there was a piece on CBC’s Marketplace show recently about mortgages being registered as collateral vs conventional and I thought I would take a moment and explain the differences between those two types of registrations.
Collateral mortgages are becoming more common and it is important that clients understand the differences. Collateral mortgages are typically registered for more than the actual mortgage requested (in some cases, up to 125% of the value of the home). The terms of the mortgage are the same ie 5 year term, 25 year amortization for example.
The benefit of a collateral charge is that it can allow the client to refinance up to the amount of the registration without incurring legal fees (assuming that the client qualifies and that the property appraises). There are two cons. At renewal a client cannot switch if they do not like the rate so they are somewhat at the mercy of the lender in terms of getting the best rate deal. Also, should a client have financial issues which will not allow them to qualify for a standard bank mortgage they may have trouble getting a second mortgage as not all lenders will go into second position behind a collateral charge.
As a mortgage agent it is not my job to pick one type of registration over another, it is my role to ensure that a client understands their mortgage options so that they can make an informed decision based on their current circumstances, taking into account what impact that decision may have on future choices.
As always, should you have any questions about this information please feel free to call or email me.
Cheers
Karen Lemieux
Accredited Mortgage Professional, CFP, BComm
Trust, Service, Accountability
Mortgage Agent
Mortgage Brokers Ottawa
788 Island Park Dr
Ottawa, Ontario
K1Y 0C2
Fax: 613-274-7389
Email: karenl@mortgagebrokersottawa.com
Apply Securely Online: www.karenlemieux.com
Broker license: 11759
” The highest compliment my clients give me is the referral of their family, friends and business associates. Thank you for your trust.”
Cell: 613-304-1500
Office: 613-798-1973
