Real Estate

Collateral Mortgage questions

  • Last Updated:
  • Jun 25th, 2018 2:03 pm
[OP]
Deal Addict
Feb 6, 2014
1617 posts
372 upvotes
Brampton

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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5 replies
Member
Dec 21, 2010
306 posts
215 upvotes
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.
Deal Fanatic
Jan 15, 2017
5311 posts
5429 upvotes
Ottawa
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.
Deal Addict
Apr 13, 2017
2935 posts
1412 upvotes
GTA
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?
Deal Guru
User avatar
Feb 2, 2014
10416 posts
3047 upvotes
Toronto
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
Deal Guru
User avatar
Feb 2, 2014
10416 posts
3047 upvotes
Toronto
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

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