How your mortgage is registered could COST YOU MONEY

The odds are that your current mortgage is registered on title as a ‘regular charge’.  The benefits of having a mortgage registered as a ‘regular charge’ include:

  1. At the end of your mortgage term (for example after a 5 year term), you are permitted to transfer or switch your mortgage to another institution without having to pay legal fees.
  2. Having your mortgage registered as a ‘regular charge’ also provides you with the opportunity to add a secured line of credit with the institution of your choice.
  3. If you were to lose your job, just as a large number of Canadians have over the last few years, your credit slips a bit, and you need to access some of the equity in your home to pay off some bills, to start a business, or to go back to school, then you can add on a 2nd mortgage.

The alternative is registering your mortgage on title as a ‘collateral charge’. Effective October 18th 2010, all new TD Canada Trust mortgages are registered as ‘collateral charges’, and may register up to 125% of the value of your home to title.  So how does it affect you if your mortgage is registered as a ‘collateral charge’?

PROS:

  • If you would like to refinance your home at some point during your term, you can do so without having to pay legal fees.

CONS:

  • If you choose to switch your mortgage at the end of your term, it will cost you approximately $900 in legal fees, where otherwise it would have been free.
  • If you would like to add a secured line of credit, you can only add one with the financial institution that holds your mortgage – you are not free to make your own choice.
  • If needed, you will not be able to add a 2nd mortgage to your property with another institution.
  • Theoretically, it could allow your institution to charge you a higher interest rate on renewal or refinance, since there are associated switching costs.

How would you want YOUR mortgage registered?

Doug Adlam