Collateral Mortgage questions

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Jun 25th, 2018 2:03 pm

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Jun 24th, 2018 2:59 pm

ambujakshi [OP]: Deal Addict; Feb 6, 2014; 1617 posts; 372 upvotes; Brampton

Jun 24th, 2018 2:59 pm

Collateral Mortgage questions

Hello,

I have couple of questions about collateral mortgage - appreciate if anyone can help.

I currently have a Scotia Total Equity Plan (STEP) mortgage. I don't have any LOC with this mortgage, though the amount that I have already paid is available as a credit.

1) If I need to discharge this mortgage and take mortgage from another lender, how much does the new lender need to pay Scotia ? Is it the amount left on the mortgage / full registered collateral amount?

2) If I have a collateral mortgage with bank A without borrowing on the available LOC, can I take LOC from another bank B based on home equity? The reason I ask is because bank A has good mortgage rate, but bank B has good LOC rate.

Thanks,
Amb

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Jun 24th, 2018 4:32 pm

khkchan: Member; Dec 21, 2010; 306 posts; 215 upvotes

Jun 24th, 2018 4:32 pm

The amount you will need to pay existing lender will be dollar outstanding + discharge fee + reinvestment fee + penalty (if you pay early). You will get the payout statement through your lawyer. Check your mortgage contract for the fees.

The new lender will need to register a lien on your house before they release the funds for you to pay off first mortgage. There will be lawyer fee included (about $800 - $1000). Also appraisal (about $300)

I believe banks can register 2nd lien on a house if you have enough capital on your house. Again, you are talking about another set of lawyer fee and appraisal fee if you go through different bank.

+1

Jun 24th, 2018 4:42 pm

skeet50: Deal Fanatic; Jan 15, 2017; 5311 posts; 5429 upvotes; Ottawa

Jun 24th, 2018 4:42 pm

It can be difficult to obtain a HELOC from a different lender as many times the collateral charge is for 100% or more of the value of the home. If there is no equity to register the HELOC, then approval is denied.

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Jun 24th, 2018 5:44 pm

headleygrange: Deal Addict; Apr 13, 2017; 2935 posts; 1412 upvotes; GTA

Jun 24th, 2018 5:44 pm

Thanks.

Another question that popped up in my mind is:

if a lender registers the collateral to 125% of value of the property but homeowner doesn't use of any of the LOC, will it be a problem to discharge the collateral and move the mortgage elsewhere (ignoring discharge and lawyer fees) ? I.e will the new lender consider collateral value of 125% at the current lender as a deal breaker?

Jun 25th, 2018 2:01 pm

CdnRealEstateGuy: Deal Guru; Feb 2, 2014; 10416 posts; 3047 upvotes; Toronto

Jun 25th, 2018 2:01 pm

ambujakshi wrote: ↑ Hello,

I have couple of questions about collateral mortgage - appreciate if anyone can help.

I currently have a Scotia Total Equity Plan (STEP) mortgage. I don't have any LOC with this mortgage, though the amount that I have already paid is available as a credit.

1) If I need to discharge this mortgage and take mortgage from another lender, how much does the new lender need to pay Scotia ? Is it the amount left on the mortgage / full registered collateral amount?

2) If I have a collateral mortgage with bank A without borrowing on the available LOC, can I take LOC from another bank B based on home equity? The reason I ask is because bank A has good mortgage rate, but bank B has good LOC rate.

Thanks,
Amb

1-You need to pay discharge fee (about $300) and legals (about $800). The new mortgage amount will match what is outstanding to Scotia.

2-Why don't you get a LOC setup under the STEP product? That's by far the easier solution to getting a LOC. As @skeet50 mentioned, you won't be able to get a HELOC from another lender behind the STEP product.

Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

+1

Jun 25th, 2018 2:03 pm

CdnRealEstateGuy: Deal Guru; Feb 2, 2014; 10416 posts; 3047 upvotes; Toronto

Jun 25th, 2018 2:03 pm

headleygrange wrote: ↑ Thanks.

Another question that popped up in my mind is:

if a lender registers the collateral to 125% of value of the property but homeowner doesn't use of any of the LOC, will it be a problem to discharge the collateral and move the mortgage elsewhere (ignoring discharge and lawyer fees) ? I.e will the new lender consider collateral value of 125% at the current lender as a deal breaker?

Doesn't matter if you have a $0 balance or not on the HELOC...it's still a collateral charge. You can switch the mortgage, but you will have to cover the legals (about $800) if you have a collateral charge.

Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

+1

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