Although they share much of the same DNA, regular and collateral mortgages have crucial and consequential differences.

 

Regular Mortgages Are Known Qualities

The interest rate, the authorization period, your monthly payments and the day your mortgage will be paid in full are all clear. Unless you refinance, the outstanding balance gradually goes down.

 

At maturity, after a 5-year term, for example – you can renew at the then current rate, or transfer your mortgage to another lender at no cost. You can also get a second mortgage or a line of credit.

 

Collateral Mortgages Look Regular – But With A Twist

Here, your property becomes the collateral for a promissory note issued by the lender.

 

The upside? You can often have your collateral mortgage registered for up to 125% of the value of the property – extra money to tap into later.

 

Red Flags On Collateral Mortgages

  • Lenders will not transfer or switch a collateral mortgage – ergo, no competitive shopping unless you discharge it first and pay fees to have a new mortgage registered.
  • If you want to refinance and this lender says ‘no’. you’ll have to go elsewhere – which means discharging the mortgage and paying a penalty.
  • Your lender can use your mortgage to pay out other debts you have with them, including loans or credit cards.
  • Products that include a Line of Credit are all registered by the major banks as collateral mortgages

 

 

 

Collateral Damage? It never needs to happen. You simply must ask the right questions. Learn more at Hanley Mortage Group.

Although they share much of the same DNA, regular and collateral mortgages have crucial and consequential differences.

 

Regular Mortgages Are Known Qualities

The interest rate, the authorization period, your monthly payments and the day your mortgage will be paid in full are all clear. Unless you refinance, the outstanding balance gradually goes down.

 

At maturity, after a 5-year term, for example – you can renew at the then current rate, or transfer your mortgage to another lender at no cost. You can also get a second mortgage or a line of credit.

 

Collateral Mortgages Look Regular – But With A Twist

Here, your property becomes the collateral for a promissory note issued by the lender.

 

The upside? You can often have your collateral mortgage registered for up to 125% of the value of the property – extra money to tap into later.

 

Red Flags On Collateral Mortgages

  • Lenders will not transfer or switch a collateral mortgage – ergo, no competitive shopping unless you discharge it first and pay fees to have a new mortgage registered.
  • If you want to refinance and this lender says ‘no’. you’ll have to go elsewhere – which means discharging the mortgage and paying a penalty.
  • Your lender can use your mortgage to pay out other debts you have with them, including loans or credit cards.
  • Products that include a Line of Credit are all registered by the major banks as collateral mortgages

 

 

 

Collateral Damage? It never needs to happen. You simply must ask the right questions. Learn more at Hanley Mortage Group.

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