The Pros and Cons of Collateral Charge Mortgages

Have you come across the term “Collateral Charge Mortgage” in your online research about mortgages?  If not, it is something you should know about.  Here is a quick primer on how a collateral charge mortgage differs from a standard charge mortgage:

This is how most fixed-rate mortgages are registered.  A Standard Charge Mortgage can be Switched/Transferred or Discharged. The ability to Switch/Transfer is important at your maturity date as it ensures you a great rate now AND in future terms. There is no cost to Switch/Transfer at renewal.

This kind of mortgage can only be Discharged and not Switched or Transferred. Therefore, the best mortgage rates may not be available to you upon renewal of your mortgage term unless you discharge and register a NEW mortgage with another lender, at your own cost.  This kind of mortgage is readvanceable, but be aware that some Banks and Credit Unions will register a Collateral Charge for a higher amount than the mortgage amount, and then use your house as security on additional debt you may obtain from that lender. They may not always tell you about this, either.

*Remember, it is always a good idea to speak to your One Link Mortgage Advisor if you are considering a collateral charge mortgage or if you think that you may have one.  They will be able to clearly explain all the pros and cons to you.