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PostPosted: Mon Apr 15, 2013 9:43 pm 
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Thought I would repost two good articles on concerns regarding collateral mortgages. Since October 2011, TD Canada Trust only offers collateral mortgages and recently ING has followed suit. Below is a link and excerpt from an excellent article regarding them. It's a shame when banks like the above take away your option of being able to choose a conventional mortgage still.

http://www.integratedmortgageplanners.c ... customers/

"Toronto Dominion (TD) Bank very quietly tweaked the way it registers its mortgage loans. While this may at first seem like a small change (that’s certainly the way TD has positioned it), the impact for many TD customers will prove significant over time. Basically, the Bank has decided to register all of its mortgages as collateral charges. While this is common for lines of credit and variable-rate mortgages, it is unusual for fixed-rate loans. In effect, TD is making it cheaper for you to borrow more money from them in the future, while at the same time making it more expensive and more difficult for you to move to different lender. This begs the question: once TD has its customers locked-up, what incentive does it have to offer aggressive pricing? Put another way, if the threat of switching lenders is your best way to negotiate a fair deal at renewal, what happens to your leverage when the bank neutralizes that threat by making it far more expensive to leave than to stay?
First, a little background. There are two ways a lender registers a loan when your home is used as the security: as a mortgage charge or as a collateral charge. Mortgage charges, which are registered at the Land Title or Land Registry Office (depending on the province), can be registered, transferred or discharged. That means that if you want to switch, or transfer, your mortgage to another lender at renewal, you can do so for minimal cost (aprox. $30), which the lender will usually cover. Collateral charges are registered under the Personal Property Security Act (PPSA) and can only be registered or discharged (not transferred).
If you have a collateral mortgage and want to change lenders, you need to re-register a new mortgage and this will cost about $800 + tax. So in future, switching your fixed-rate mortgage from TD to a different lender at renewal will cost you a little under $1000."

Toronto Star link to another article regarding collateral mortgages:
http://www.thestar.com/business/persona ... gages.html


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PostPosted: Tue May 14, 2013 10:00 pm 
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PostPosted: Tue May 21, 2013 12:23 pm 
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There are occasions when a collateral charge can be beneficial to borrowers, but the problem with TD and ING is that they don't give borrowers the choice......or even let them know that their mortgage is 'different' from that of other lenders.
The benefit to the collateral mortgage to the borrower is that if you want to borrow more money against your home then you can do so without incurring any extra charges involved with registering a new mortgage. So, in other words, you can save money IF you choose to borrow more money against your home down the road. You still have to qualify to borrow that money however and if TD or ING turns you down, then you may not have any other options.

This isn't to say that collateral mortgages should be avoided at all costs. If the rate on the collateral mortgage is low enough to save you the cost of refinancing at the end of your term (approximately $800 to register a new mortgage where you would normally be able to switch for 'free'), then it doesn't necessarily matter which type you go with from a savings point of view. If you can get the same rate from another lender who registers their mortgages in the more traditional way, than that might be the better way to go.

_________________
Paul Meredith
Mortgage Broker
CityCan Financial (est 1976)
416-409-8009
http://www.easy123mortgage.ca
paulm@citycan.com
Lic#10532

Follow me on Twitter! http://www.twitter.com/paulmeredith


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PostPosted: Mon May 27, 2013 9:31 pm 
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PaulMeredith wrote:
There are occasions when a collateral charge can be beneficial to borrowers, but the problem with TD and ING is that they don't give borrowers the choice......or even let them know that their mortgage is 'different' from that of other lenders.


Exactly Paul, that is what annoyed me about TD when I was their client. My mistake was taking the rep at TD at their word when they said there was no difference between a collateral mortgage & conventional. If I had known it would be expensive to transfer to another lender at the end of term I would not of gone with it. Of course that was back when it was still offered as an option, unlike now when it's the only mortgage type TD offers.


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PostPosted: Sat Sep 21, 2013 10:40 am 
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it is important for anyone in any capacity to advise clients on financial and credit matters that they disclose all information that affect the persons decision making. All banks should adhere to this matter. Now that TD has gone to collateral only, its even more important for the advisor to explain clearly what the details of it means. If not, they will definitely hear it from the lawyers at signing and trust me lawyers don't always explain collateral charges properly.

Just because TD was the first bank to change over, it does not mean that other banks are not pushing this product and in some cases, applying a collateral charge without notifying the client. So regardless of the bank, bad advisors do exist. My friend who is an advisor at another big top 5 banks is mandated to push collateral charges on his mortgages and if he uses a standard charge instead, must explain to his manager in writing the reasons for not applying a collateral charge. There are strong indications that all banks will switch over like TD.

Now lets look at the collateral charge. It is a product put in place to help the majority customer base who would like to remain with their financial institution and not jump around from bank to bank. Mortgage switches from TD represented a much smaller number than those clients refinancing with TD. I cannot speak on behalf of the other banks but i'm sure they are similar.

Let's not under estimate the decisions being made by the big banks when a new product is released or changed. They have hundreds of analysts looking at market data and assessing the risks and impacts before it goes to the public.

Let me clear any confusions on those who believe that collateral charges lock customers to their bank. When a collateral charge is placed on a property and the mortgage comes for renewal. If the customer would like to transfer the mortgage to another F.I , the actual mortgage can be transferred but the charge has to be discharged. This is because bank will not or refuse to accept a registered charge from another bank. This is the same if someone has a Step mortgage with Scotia and the client wants to move to RBC, the collateral has to be removed causing a legal fee to be involved. Let's not kid anyone, similar to brokers buying down rates in order to win customers, banks are offering incentives to switch over. They have and will continue to cover legal fees if it means they will gain a mortgage customer and potentially more of the persons business down the road.

If anyone has any specific questions about collateral mortgages the benefits/impacts, please do not hesitate to contact me directly.

Nick Choukour
Manager, Mobile Mortgage Specialist
TD Canada Trust
647.201.8171
nick.choukour@td.com


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