Monday, February 13, 2012

Collateral versus Standard Charge Mortgages

Another lender has moved to collateral charge mortgages so it's becoming increasingly important to understand the differences between a collateral and standard charge mortgage. Which is better for you? It all depends on your preferences and future needs.

Collateral charge is ideal if you want to be able to access your equity for debt consolidation, renovations, or to invest in property or investments easily and cost effectively. Your mortgage is registered for the same or more than the property value; 100% at ING, 125% with TD Bank, which is why you can access your equity. The downside is at renewal because your negotiating ability with your lender may be affected; it is harder to switch lenders without getting a new mortgage and paying legal fees. In addition, the lender may be able to seize equity to cover other debts with that same lender.

Offered by the majority of lenders, standard charge is ideal if you won't need to refinance your mortgage during your term, and if you want to have the ability to easily and cost effectively move from lender to lender at renewal. If you have a standard charge and need to borrow more, you have the option of a second mortgage or line of credit. Some lenders offer both – standard charge mortgages and HELOCs, which are often a collateral charge.

Whether you're buying your first or next home, getting ready for renewal, taking out some equity for debt consolidation, renovations, or investing, let us help you get the right mortgage type (collateral or standard charge) with the rate and features matched to your needs.

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