For sure!VladD973383 wrote: ↑ Paul could you please explain more about that "collateral charge" and how it impacts if later:
Will I have to pay any additional fees if I have a collateral charge?
- I want to buy a new house and port my mortgage
- I want to buy a new house, pay my current mortgage and get a new one
- I find a better rate and switch the mortgage to a different lender
Or does it only impact if I need to apply for the second mortgage / other credit?
Thanks in advance for your help!
It does not affect your ability to port your mortgage, or pay it out before the end of the term. Nor does it add any additional cost to do so.
The only time it will could end up costing you additional money is when you go to switch lenders. Either at the end of the term, or in the middle of the term. When switching a standard charge mortgage, the legal and appraisal fee is normally paid for you by the new lender. With a collateral charge mortgage, the legal and appraisal fee apply. In some cases, some or even all of these fees can be paid for you, but it's often at a higher rate, which can be anywhere from 0.05% to 0.15% higher if you want all the fees covered. In most cases, it makes more sense to pay the fees and take the lower rate. Either way however, there is a cost to switching a collateral charge mortgage one way or another in most cases.
What i'm referring to above is just switching over your current balance, not refinancing. Refinancing meaning you are increasing your mortgage amount, and/or increasing your amortization. In this case, it doesn't matter if you have a collateral charge or not. The fees would apply. In some cases, these fees can still be covered for you.
Anytime you have a 2nd component such as a HELOC attached to your mortgage, then you have a collateral charge mortgage, regardless of the lender. This will be the case 100% of the time. Also, any new mortgage with TD, National Bank, or Tangerine will also be a collateral charge. It does not matter whether you have a HELOC attached to it or not.
It's also important to note that these additional charges when switching are 3rd party costs. They are not charges from the lender holding your mortgage, nor are they charges from the new lender. It's not uncommon for someone to walk into TD (for example), and be told that there are no additional fees to switch at the end of the term other than the discharge fee. In these cases, they are just referring to the fees charged by them. They generally will not tell you about the third party costs involved with switching a collateral mortgage.
Another drawback to having a collateral charge mortgage is that if you apply for any additional credit with your mortgage lender, then that too will get secured against your collateral charge mortgage. Loans, 'unsecured' lines of credit, credit cards, etc. Let's say you had a dispute with your bank on some credit card charges and refused to pay them until it was sorted out. The lender could then place you in default of your mortgage, since they have the credit card secured with the collateral mortgage. This is something that is EXTREMELY rare, but it's possible when you have a collateral mortgage. Just to be clear, this is ONLY for credit accounts you have with the same lender as you have your collateral mortgage with.
Another thing to be conscious of is the terminology used when talking to mortgage lenders. Many will ask their bank if they are getting a conventional mortgage, when they really want to know if their mortgage will be collateral or not. This is where it can get a little confusing. A conventional mortgage is a mortgage that has 20% or greater down payment or equity, and has nothing at all to do with the type of registration. You can walk into TD Bank (using them again as an example), and ask them if you are getting a conventional mortgage. If you have 20% downpayment, then they can tell you with confidence that your mortgage will be conventional. This is the truth. But what they may not tell you is that your conventional mortgage will also get registered as a collateral charge. In other words, your mortgage can be conventional and collateral at the same time. A better way of asking would be to simply ask if it's a collateral charge mortgage.
Hope you find this helpful.
Mortgage Broker, Author
CityCan Financial Corp (lic. 10532)