Decisions you make on your mortgage should not just be about getting best mortgage rates. Make an Informed Decision on your Mortgage and find out more about a Conventional Mortgage versus a Standard Mortgage. There are advantages and disadvantages to both mortgages, depending on your mortgage needs.
Standard Mortgage – Standard charge mortgages are offered by the majority of lenders, although some offer both – standard charge mortgages and HELOCs, which are a collateral charge. The mortgage is registered for the amount borrowed giving you the option to access your equity at a later date either through a second mortgage, a secured line of credit or by renegotiating with your existing lender to adjust your mortgage amount. With a standard charge mortgage you are not as tied to your lender for your full amortization period. It’s ideal if you want the flexibility to move from lender to lender at renewal easily and in a more cost effective way; keeping your options open.
Collateral Mortgage – The primary difference with a collateral charge mortgage that that the mortgage is registered for up to 125% (TD) or 100% (ING) of the value of the home at closing, instead of the exact loan amount borrowed. The advantage behind this is that it makes it easier to access your equity with the same lender for debt consolidation, renovations etc. Since the mortgage was registered for a higher amount you don’t need to visit a lawyer and pay legal fees everything can be done through your existing lender quickly. This flexibility is one of the primary advantages of collateral charge mortgages.
The downside 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. That means if someone wants to change lenders for a better rate or product feature, they need to start from the beginning and pay new legal fees, which range from $500 to $1,000. Technically they can be assigned but most lenders don’t accept the transfer. With regular standard charge mortgages, you can switch easily through a no-fee transfer, although your existing lender will charge a small discharge fee.
Not many people understand the difference between a conventional mortgage and a collateral mortgage, but our mortgage brokers have both knowledge and experience to assist you in making the financial decision on choosing between a Conventional or Collateral mortgage. When choosing any mortgage product, do your research, know what your options are and find a mortgage professional that works for you, not the lender.