Over the past few weeks, while re-financing a rental property, the term "collateral charge mortgage" has come into play. It seems that these are becoming quite common. I can see the advantage of having one but I personally don't like the thought of having to pay extra ( for whatever reason) to get out of it, even when the term comes due. I am just curious as to how many "seasoned investors" use these?
another mortgage question
- Thread starter tailedger
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It is very uncommon but will get more common as lenders get more creative to bundle multiple properties under one blanket mortgage. Expect higher upfront fees, higher interest rates and lower LTVs than conventional residential mortgages. Also expect to pay discharge fees when selling individual assets.
Actually, TD bank only does collateral charge mortgages and the other big banks may soon follow suit which I am sure you already know. If you apply to a credit union and want a variable rate mortgage, it is automatically a collateral charge mortgage, a fixed rate can be either or. I only know this as I had requested a variable rate mortgage recently. I am just repeating what the broker said.
Perhaps I misunderstood the term collateral mortgage. I meant a mortgage collaterized across multiple assets.
You probably meant a collateral mortgage on a single asset. That is registered on title and on personal property registry - common for LOC but not mortgages - and can be even higher than your property value. It incurs higher switching costs and can prevent you from getting additional loans.
More here www.integratedmortgageplannershttp:...l-mortgages-good-for-banks-not-for-customers/
You probably meant a collateral mortgage on a single asset. That is registered on title and on personal property registry - common for LOC but not mortgages - and can be even higher than your property value. It incurs higher switching costs and can prevent you from getting additional loans.
More here www.integratedmortgageplannershttp:...l-mortgages-good-for-banks-not-for-customers/
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Yes, that is what I meant.
Hi Frank:
Collateral mortgages are becoming more common among the big banks as most default to a collateral charge unless you select the standard mortgage charge option on the commitment letter. Collateral mortgages may make sense in theory by saying you have easier access to funds if needed, however what they don't tell you is:
1. You still have to apply for and qualify for the additional funds, it is not automatically approved
2. If you want to switch your mortgage to a different lender you likely won't be able to as most lenders won't take on another lenders collateral mortgage
3. If you don't qualify for the additional collateral financing with the bank you won't be able to get 2nd mortgage financing elsewhere as they won't go behind a collateral charge that is using more than 80% of the current property value
4. They are not great for creative investing
Most Mono-line lenders do not use collateral charge mortgages, however, there are limited mono-lines that will lend on true 100% rentals since the most recent mortgage rule changes came in.
I would be happy to discuss this or any other questions you have by phone or email.
Keith Uthe, REIA | Mortgage Alliance - Enrich Mortgage Group |
Residential - Commercial - Investment Property - Debt Restructuring - Construction
Office 403.614.8843 Toll Free: 1-877-366-3487
Website: www.mortgagealliance.ca/KeithUthe
email: [email protected]
4620 Macleod Tr. S. | Calgary AB | T2G 5E8 |
Collateral mortgages are becoming more common among the big banks as most default to a collateral charge unless you select the standard mortgage charge option on the commitment letter. Collateral mortgages may make sense in theory by saying you have easier access to funds if needed, however what they don't tell you is:
1. You still have to apply for and qualify for the additional funds, it is not automatically approved
2. If you want to switch your mortgage to a different lender you likely won't be able to as most lenders won't take on another lenders collateral mortgage
3. If you don't qualify for the additional collateral financing with the bank you won't be able to get 2nd mortgage financing elsewhere as they won't go behind a collateral charge that is using more than 80% of the current property value
4. They are not great for creative investing
Most Mono-line lenders do not use collateral charge mortgages, however, there are limited mono-lines that will lend on true 100% rentals since the most recent mortgage rule changes came in.
I would be happy to discuss this or any other questions you have by phone or email.
Keith Uthe, REIA | Mortgage Alliance - Enrich Mortgage Group |
Residential - Commercial - Investment Property - Debt Restructuring - Construction
Office 403.614.8843 Toll Free: 1-877-366-3487
Website: www.mortgagealliance.ca/KeithUthe
email: [email protected]
4620 Macleod Tr. S. | Calgary AB | T2G 5E8 |