There are two ways to register a mortgage and they differ greatly. It’s important to speak with a Brampton mortgage broker about your registration and understand the options before your meeting.
Standard Charge Mortgage
A standard charge mortgage registration means your title is only registered for the amount you’re mortgaged for. So if you made a downpayment of 25% on a $400,000 house and have only borrowed $300,000 for your mortgage, then your standard charge mortgage is only registered for $300,000.
Unlike the alternative, a standard charge mortgage allows for flexibility to switch lenders upon renewal time, without very large fees. In essence, the lenders have to earn your mortgage again, which puts you in a great position to shop around and get a better rate.
Collateral Charge Mortgage
A collateral charge mortgage registration means your mortgage is registered on the title for more than you are mortgaged for. For the same $300,000 mortgage from the above example you may be registered for up to $400,000. In other words they register the title for more than the closing costs.
Why is collateral charge mortgage registration a poor choice?
When you’re up for renewal, this means you will have hefty legal fees to switch lenders if you find a better deal. Or if you happen to sell your home and close the mortgage before the 25 or 35 term is up, again you’ll be hit with these nasty fees.
Why is it even an option and who offers collateral mortgage registrations?
Mostly the big banks will offer collateral mortgage registrations and it ensures you’ll keep your mortgage with them come renewal time, in order to avoid the legal fees. However they are still able to sell the idea to a few folks who haven’t done their research. And here’s why – they sell it as easy access to your equity, but for the inside scoop contact a trusted Brampton mortgage broker like myself.