There has been some recent negative media attention lately around Collateral Mortgages. There are definitely pros and cons for both Collateral & Residential. What's the difference? Well it's in the way it's registered at land titles. A residential mortgage is a more traditional way of registering a mortgage. Collateral mortgages have gained popularity over the last 20 years or so. There are lots of benefits to them. The RBC Homeline Home Equity Loan, for example, is registered as a collateral mortgage. It gives you features and benefits such as the ability to split your mortgage balance between fixed and variable rates in order to hedge against the ups and downs of rates over the life of the mortgage. It also allows you to have a line of credit built in for future borrowings. RBC offers both collateral and residential mortgage. Where some of the media attention has been focused lately is on the lenders who only offer collateral mortgages like, as reported in a recent CBC news story, TD, ING Direct, National Bank and various credit unions. The con getting the media attention is the fact that it is more difficult & expensive to switch your mortgage from one lender to another with a collateral mortgage. The mortgage has to paid out completely and reregistered at land titles. Of course to do this will involve incurring legal fees and more paperwork. There are a couple lenders, however who will pay for those legal fees. Two of them noted in the media report are ICICI as well as RBC.
My advice; ask your Mortgage Advisor in the early stages of the application process. Will my mortgage be a collateral or residential one?
If you have any questions around this topic please don't hesitate to call me anytime to discuss or clarify.
Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054