Standard Vs. Collateral Charge Mortgages
Are you curious to know about what a collateral charge mortgage is and why it differs from a standard charge mortgage? You’re not alone! More lenders are moving to collateral charge mortgages, so it’s becoming increasingly important to understand the differences between a collateral and standard charge mortgage.
But which is better for you? While both have advantages and disadvantages, it depends on your preferences and future needs. Therefore, it’s necessary to understand those differences to ensure you get the mortgage that best fits your long-term goals. As an expert in the field, Mortgage With Vadim wants to help you understand which product works best for you. This is why I have written down information on both topics so that you can gain a better understanding of them.
A. Standard charge mortgage
A standard charge only secures the mortgage that is outlined in the document. This means that it’s registered for the actual amount of your mortgage and doesn’t secure any other mortgage products you may have with your lender. This is ideal if you don’t need to refinance your mortgage during your mortgage term and if you want to have the ability to easily and cost-effectively move from lender to lender at renewal. The majority of lenders offer a standard charge mortgage. With a standard charge mortgage, if you need to borrow more, you have the option of a second mortgage or line of credit. You are not as tied to your lender for your full amortization period since it’s easier to switch lenders at renewal with little or no cost and keeps your options open. However, this makes it less easy to tap into your equity for debt consolidation, renovations, or to invest in property or investments since you have to visit a lawyer and pay legal fees digging into another mortgage.
B. Collateral charge mortgage
A collateral charge is basically a method of securing a mortgage against your property. Unlike the standard mortgage mentioned above, a collateral charge is re-advanceable, which means the lender can lend you more money after closing without you needing to refinance and pay a lawyer. A collateral charge mortgage is an ideal option if you want to be able to access your equity for debt consolidation, renovations, or to invest in property or investments easily and cost-effectively, i.e., no legal fees (rate may be higher than the original, and you’ll need to qualify.) Your mortgage is registered for the same or more than the property value, which is why you can easily access your equity. However, the downside to this comes at renewal. For consumers who want to keep their options open at maturity and have negotiating power with their lender, this isn’t the best product feature because collateral charge mortgages are difficult to transfer to another lender. Moreover, getting a second mortgage could also be challenging unless your home significantly appreciates in value.
It’s important to understand the differences between a collateral and standard charge mortgage because they are suited to different needs, and if you make the wrong choice, it could cost you. Most lenders offer standard charge mortgages, although some offer both standard charge mortgages and HELOCs, which are often collateral charges. You choose the option that best meets your needs. Determining whether to get a standard or collateral charge mortgage adds another layer of complication for many homebuyers and owners. Speak to an experienced mortgage broker who is only focused on mortgages and knows what each of the over fifty lender partners has to offer. Your broker will analyze your situation and help you determine what’s right for you and what’s not.
If you are looking for a mortgage broker in Vaughan, ON, reach out to me at Mortgage With Vadim. With over ten years of experience in the mortgage and real estate industry, my reputation and long-standing experience allow me to negotiate great rates and access limited-time mortgage specials. As a mortgage professional, I will stay with you for the life of your mortgage with advice and opportunities.
I offer services such as home purchase mortgage, refinance mortgage, debt consolidation, first-time home buyers, and mortgage renewal to clients across Vaughan, Toronto, Richmond Hill, Markham, Newmarket, Mississauga, Milton, Oakville, Burlington, North York, Etobicoke, Kleinburg, Scarborough, East York, North Toronto, GTA, and the surrounding areas.
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