Real Estate

The Official Mortgage Rates Thread

  • Last Updated:
  • Oct 17th, 2017 8:22 pm
Member
May 1, 2017
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valuemortgage wrote:
May 19th, 2017 9:53 am
One must be careful when the word "conventional" comes up, as this may mean something different. See the text below for more details.

Just want to add a bit of information on the subject of "collateral" and "charge", as those words often come up here and there is endless confusion regarding those terms.

First we need to understand what "mortgage" and "charge" are, and that they are 2 completely different things. A mortgage is just a loan, similar to a car loan or any personal loan. You ask a lender for X amount of money, and sign a document attesting you will pay it back. In order to offer low rates on mortgage loans, lenders need to have that loan secured by a collateral, so that in the event the loan is not paid back, the lender has rights registered against the property. To register their interest on the property, the lenders use what is called a "charge", which is just like any other lien. The key difference here is that when the lender asks the lawyer to register that lien, they can use one of these 2 types of charge : a "standard mortgage charge" or a "collateral charge".
Why are they different? Because with a regular standard charge, the lender registers the lien in the exact same amount as the mortgage loan. So, if you buy a $500k property and have 200k downpayment, the mortgage amount will be 300k, and the lender will register a 300k lien (the charge) against it, to "secure" that loan. If you need to borrow more money later on, as years go by and the property value increases, the lender cannot simply release more money to you. They must remove that "charge", or as we often say - it must be "discharged", and register a new lien. Using the numbers above, if the property is now worth 600k and the client wants to get 100k back and refinance that mortgage, the lender would have to discharge that mortgage and register a new one, with a higher amount (matching the new amount required). As the market evolved, more products were created to suit different needs of clients in different situations, so some lenders started offering mortgages that would now be secured by a "collateral charge" (instead of a standard mortgage charge), simply because a collateral charge allows the lender to register X amount against the property and the amount could be higher than the mortgage amount being disbursed. In the example I used above, the lender could ask the lawyer to register a collateral charge against the property in the amount of $500k, even though they were only releasing to the client 300k. The potential advantage to the client is that if he needs 100k later on, the current charge registered ALREADY covers up to 500k, so they can adjust the loan without the need to remove the charge and register a new one.
Now the potential downside of a collateral charge - it cannot be moved from lender A to lender B without the assistance of a lawyer or a title company. What this means is that at the end of your term, should you decide to change lenders because you see a better offer with a different lender, even if you have no intention of cashing out any equity, this transfer from lender A to B would be treated as a refinance, and you would be required to pay a lawyer or a title company some fees, around $1000.00 or so. If you only had a simple standard mortgage charge, you could move from A to B without any legal fees, as standard mortgage charges can be transferred without legal services required.
The thing to remember is that a collateral charge will give you some flexibility ONLY if you need to borrow more against the property value, down the road. A standard mortgage charge would not give you that flexibility without extra costs, however if you dont need to borrow more against the equity, it saves you money as you have more freedom to change lenders without legal fees.

About the word "conventional" - It only means a mortgage scenario where the client has 20% downpayment (if purchasing) or 20% equity (in transfers or refinances). Because the lenders do not need to buy mortgage insurance, this loan is called "conventional". In situations where the down payment/equity is less than 20%, you are required to have the loan insured by CMHC/Genworth, and this loan is NOT called "conventional" - this is what we call a "high ratio" or "insured" mortgage. It still has NOTHING to do with the type of charge, as the charge is simply the lien that will be registered against the property, not the type of loan.

Lenders such as TD bank and NBC use only collateral charges. So, the scenarios below are possible :

A - Client is buying a 500k property with 5% down payment - this is not a "conventional" mortgage because it needs to be insured. This will be a "high ratio" or "insured" mortgage, but TD will tell the lawyer to register a collateral charge to secure the loan. As a result, you will have an insured (or high ratio) mortgage attached to a collateral charge.
B - Client is buying a 500k property with 30% down payment - this does not require insurance, so it will be a "conventional" mortgage, and TD will tell the lawyer to register a collateral charge to secure the loan, just like the scenario above. As a result, you will have a conventional mortgage attached to a collateral charge.

If the lender is First National, Industrial Alliance, Mcap, ICICI Bank, Paradigm, and pretty much all other lenders on the broker channel :

A - Client is buying a 500k property with 5% down payment - this is not a "conventional" mortgage because it needs to be insured. This will be a "high ratio" or "insured" mortgage, but these lenders will tell the lawyer to register a standard mortgage charge to secure the loan. As a result, you will have an insured mortgage attached to a standard mortgage charge.
B - A - Client is buying a 500k property with 30% down payment - this is a conventional loan, as it does not require insurance. This will be a "conventional" mortgage and these lenders will tell the lawyer to register a standard mortgage charge to secure the loan. As a result, you will have an conventional mortgage attached to a standard mortgage charge.
Thanks Andre - Great information. Mortgage lingo can be convoluted at times, and it's important for people to understand the verbiage.
_________________________________
Connor Green
Mortgage Agent
Concierge Mortgage Group
#12179
Newbie
Jan 1, 2017
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I have a question for the mortgage gurus. I got a mortgage with HSBC back in 2014, I read all the documents I signed and nowhere it says whether it is a conventional or collateral mortgage. I went to another lender to get an equity line of credit and when they did a title search they got that the HSBC mortgage was registered as an equity mortgage. Is there anything I can do to get hsbc to change the title charge for my mortgage to conventional?

I called them and their mortgage department on the phone is useless so I have an appointment to go to the branch next week.
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Geese_Howard wrote:
May 18th, 2017 8:11 pm
Since the house is worth over 1 million you can get better rates and options. Variable as low as 2.1% and cash back depending on your closing date and size of your mortgage.
If you don't mind me asking, do you ever tell your clients that your mortgages are collateral charge mortgages? Most bank reps do not ever mention this when when selling collateral charge products and I am shocked by it.
Kevin Somnauth, CFA
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GreenMortgages wrote:
May 19th, 2017 8:17 am
Why would the house being over 1m give access to better rates and options?
I'm not a broker. If the house is valued at over 1 million or has a mortgage of over 1 million I tend to give the lowest rates.
Mortgage Specialist in the GTA here to answer all your questions.
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ProductGuy wrote:
May 19th, 2017 12:01 pm
I have a question for the mortgage gurus. I got a mortgage with HSBC back in 2014, I read all the documents I signed and nowhere it says whether it is a conventional or collateral mortgage. I went to another lender to get an equity line of credit and when they did a title search they got that the HSBC mortgage was registered as an equity mortgage. Is there anything I can do to get hsbc to change the title charge for my mortgage to conventional?

I called them and their mortgage department on the phone is useless so I have an appointment to go to the branch next week.
It can be really hard to get a straight answer on this from banks, and paperwork is usually not very clear as to whether or not it is a collateral charge. While they should be legally obligated to disclose this is in big, bold letters at the top of your mortgage documents, it's not. I'd be surprised if it made reference to the collateral charge anywhere in the paperwork at all. I would suggest combing through it to see. If it is NOT a collateral charge, it's not going to make any reference to that, nor will it say it's being registered as any sort of charge at all.

Avoid using the word 'conventional' as this applies ONLY to mortgages with 20% or greater equity and has nothing to do with the charge itself. You can have a conventional mortgage that is also a collateral charge. See the great explanation from Valuemortgage three posts above your original post higher up on this page.

So is the HSBC mortgage a collateral charge? From what's been previously posted on this board, they usually tell their clients that it is not. There was a poster quite a few pages back (don't recall their username) who said they were told several times that it was not a collateral charge, but upon further digging found out that it was. The truth still remains a mystery.

Not surprised the people on the phone are useless. Banks don't always have the most knowledgable people answering questions unfortunately. It's not uncommon for them to have a loose comprehension of the terms themselves. You an also check out this page to see what HSBC customers are saying about them: https://www.consumeraffairs.com/finance ... tgage.html
Paul Meredith
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CityCan Financial Corp (lic. 10532)
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CdnRealEstateGuy wrote:
May 19th, 2017 12:19 pm
If you don't mind me asking, do you ever tell your clients that your mortgages are collateral charge mortgages? Most bank reps do not ever mention this when when selling collateral charge products and I am shocked by it.
I always mention it and go over everything. I'm a pretty honest person and most of by business comes from repeat business so I don't plan on burning any bridges. There are good both good and bad bank employees and mortgage brokers who hide stuff from their clients and that's not right. I inform them right from the start that all our mortgages are portable so if they upgrade in the future they can port over their existing mortgage. We're also the only institution that that lets you break your existing mortgage without penalty if your new mortgage is double the amount.

I do a lot of business off rfd. Everyone who messages me knows about collateral mortgages I go over everything and I find people would rather have guaranteed savings than "what if" scenarios.
Mortgage Specialist in the GTA here to answer all your questions.
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Geese_Howard wrote:
May 19th, 2017 1:21 pm
I always mention it and go over everything. I'm a pretty honest person and most of by business comes from repeat business so I don't plan on burning any bridges. There are good both good and bad bank employees and mortgage brokers who hide stuff from their clients and that's not right. I inform them right from the start that all our mortgages are portable so if they upgrade in the future they can port over their existing mortgage. We're also the only institution that that lets you break your existing mortgage without penalty if your new mortgage is double the amount.

I do a lot of business off rfd. Everyone who messages me knows about collateral mortgages I go over everything and I find people would rather have guaranteed savings than "what if" scenarios.
I'm glad you make sure everyone is aware that your products are collateral charges.

Most people want the "guaranteed" savings because they typically don't realize how often people need to break mid-term, for what ever reason. And the "guaranteed" savings is essentially washed when they need to pay $1400 to switch lenders to remain competitive in 5 years. I do agree though that people tend to lean towards the cheapest rate right now, as opposed to cheapest cost long-term, because they may be either short-sighted, financially speaking, just don't care, or are mislead.

Now, that being said, I certainly understand the benefit of collateral charges and do believe that there is a strong place for them. But for people who don't need the benefits of collateral, they simply shouldn't be in them.

I have a follow up question - is the cash back you're offering recallable if the client breaks mid term?

Also, just wanted to let you know that several lenders refund the penalty if the client buys a new property and returns to the same institution within 90 days.
Last edited by GreenMortgages on May 19th, 2017 1:46 pm, edited 2 times in total.
_________________________________
Connor Green
Mortgage Agent
Concierge Mortgage Group
#12179
Deal Addict
Apr 26, 2004
1851 posts
49 upvotes
GTA
GreenMortgages wrote:
May 19th, 2017 1:46 pm
I'm glad you make sure everyone is aware that your products are collateral charges. I have a follow up question - is the cash back you're offering recallable if the client breaks mid term? Also, just wanted to let you know that several lenders refund the penalty if the client buys a new property and returns to the same institution within 90 days.
After 90 days the money is the clients and the client will get this in writing.
Mortgage Specialist in the GTA here to answer all your questions.
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Geese_Howard wrote:
May 19th, 2017 1:51 pm
After 90 days the money is the clients and the client will get this in writing.
Good to know. I know a few lenders recall the cash back if they break mid term.
_________________________________
Connor Green
Mortgage Agent
Concierge Mortgage Group
#12179
Newbie
Nov 28, 2013
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WEST VANCOUVER
valuemortgage wrote:
May 17th, 2017 7:10 pm
Depending on the specifics, this may not be a decent rate... 5y fixed rates with excellent pre payment and standard terms and conditions are available as low as 2.24%.
thanks for the advise, we are getting a 2M mortgage so dont have any cash to pre-payment,.....
Member
May 1, 2017
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bingcga wrote:
May 19th, 2017 2:10 pm
thanks for the advise, we are getting a 2M mortgage so dont have any cash to pre-payment,.....
The prepayment options he was referring to are options to pre-pay portions of your mortgage (often up to 20% of the original balance per year) in lump sums, penalty free during the term. So, if you ever get a large inflow of cash, and don't want to invest it, you can put it towards your mortgage. The benefit of doing this is that your mortgage balance is instantly reduced, meaning you'll pay less interest long term. Typically you can increase your mortgage payment by 20% as an alternative to lump sum payments.

Not sure if that was clear to you.

Regards,

Connor
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Connor Green
Mortgage Agent
Concierge Mortgage Group
#12179
Newbie
Aug 23, 2010
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Kincardine
I have a renewal coming up at the end of August.

I currently have ~200K left in my Scotiabank STEP collateral mortgage on a place worth approx 500K.
I don't use the HELOC part of the mortgage, so I'm open to switching to a conventional mortgage.

Looking around, 2.2 is the lowest variable rate I seem to be able to find. Is that a decent offer?

Is there an advantage to waiting until closer to the renewal date?
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willemk wrote:
May 19th, 2017 4:13 pm
I have a renewal coming up at the end of August.

I currently have ~200K left in my Scotiabank STEP collateral mortgage on a place worth approx 500K.
I don't use the HELOC part of the mortgage, so I'm open to switching to a conventional mortgage.

Looking around, 2.2 is the lowest variable rate I seem to be able to find. Is that a decent offer?

Is there an advantage to waiting until closer to the renewal date?
Considering you have a collateral mortgage, options will be quite limited for you. I would say unlikely you will find a lower rate than the 2.20%, and if you do, it's unlikely your fees would be covered for you (around $1,300 approximately).

Your also a little early to be shopping as the maximum rate hold for refinances (and switches) is 90 days with the vast majority of lenders. Other than being within the 90 day window, there would be no benefit to waiting until closer to closing for your situation.
Paul Meredith
Mortgage Broker
CityCan Financial Corp (lic. 10532)
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Sep 19, 2012
405 posts
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Calgary
Here we go again - lots of discussion on collateral charges so as always I'll chime in (and hopefully not get flamed for my comments!).

Firstly, here are some links where you'll get all the data you need:

https://www.canada.ca/en/financial-cons ... .html#toc5
http://www.cba.ca/information-on-mortgage-security
https://www.fin.gc.ca/n14/data/14-115_1-eng.asp

Secondly, some key points taken from the above links:
  • A collateral charge is defined only by the fact that the charge/lien/hypothec secures more than just the "mortgage loan". Can't stress that point enough - if the charge secures only one specific loan, then it is not a collateral charge.
  • The amount that the charge is registered for, while often a good indicator of whether the you have a collateral charge, is irrelevant. I had a collateral charge mortgage from National Bank that was registered for the total amount of my mortgage; however, it didn't change the fact that it was a collateral charge.
  • There is nothing legally preventing a collateral charge from being assigned from one lender to another. If you can find a lender willing to play ball, a collateral charge can be moved without a discharge/new charge being issued. I found such a lender: TransCanada Credit Union. Sadly, only current/former employees of TransCanada can be members of that CU.
  • Default insurers (Genworth/CMHC/Canada Guaranty) don't consider a collateral charge switch from one lender to another to be a refinance unless you take additional funds or extend the amortization. The mortgage insurance survives if you don't trip those factors.

All of the above points mean absolutely nothing if the new lender doesn't want to "free switch" your mortgage or offer you the best rates (because it's a collateral charge, because they can't, because "insert reasons here"). Some (most?) lenders just don't want to break the mold so they say "no free switch for you, you had a collateral mortgage so you be punished".
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Oct 31, 2005
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GreenMortgages wrote:
May 16th, 2017 10:09 am
Hi there,

That's an extremely competitive rate for a renewal, especially since your mortgage is collateral. You're unlikely to find a better deal as collateral switches are treated as refinances, which means your mortgage would have to be fully discharged, and re registered, which means you would incur solicitor fees.

The downside with staying with TD is that, because of the collateral charge, you can't truly compete with the best available rates at renewal because your mortgage is not eligible for typical switch products. This acts as a retention tool for TD. The idea behind getting out of a collateral as soon as possible is to give you more leverage to compete for subsequent renewals/maturities. There are lenders who cover the majority of the costs to switch out of a collateral mortgage, but their rates are not as competitive as what you've been offered (since it would be a refinance rate, not a switch rate).

Good luck with your renewal. The 2.39% is a great rate, be sure to ask about pre payment options.

Connor
Hi there,

I believe there is 15/15 prepayment options. I still have around 680K on the mtg.

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