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You Could Have A Collateral Mortgage – Know What It Is And Why The Bank Did Not Tell You About It
There are home owners in Canada that have a collateral mortgages and are unaware of it. What is a collateral mortgage and why is different to a traditionalone?
There are two basic types of mortgages: traditional or conventional and collateral. With a conventional mortgage, the amount you’re borrowing (property value minus down payment) is the amount that’s registered. But with a collateral mortgage, the amount that’s registered is more than what you are getting as a mortgage and it could be up to 125% of the property value.
The lender has both a promissory note and a lien registered against the property for the total registered amount. TD Canada Trust switched to collateral mortgages in 2010, followed by former ING Direct, now, Tangerine Bank, in 2011. National Bank is also offering this mortgage according to National Bank’s website fine print.
The good part of a collateral mortgage is easy access to credit. Since the mortgage is already registered for a larger amount, you can access additional funds in the future without extra legal fees.
The downside of it is: Restricted access to free transfers or switches to a new lender when your term is up for renewal. Restricted access to a second mortgage offered by another lender as it would be no room to register another mortgages behind your first. Since you could not transfer your mortgage to another lender, you do not have the ability to shop around for the best rate.
It is very important for you to know up front whether you’re ge
tting into a collateral or a conventional mortgage. Many people don’t realize that they have a collateral mortgage until it comes time to renew it for the information is buried in the fine print of the contract.
Fortunately, I have lenders that offer to help home owners to transfer their mortgage with no much hassle as it were a traditional mortgage offering at the same time the discounted rates competitive in the market. I’d be happy to help you make sure you get the product you are expecting and explain all the terms that matter in your mortgage.
Contact me for a free consultation. Carolina Paredes - 403 990 4817