Benefits and Differences of Collateral Charge and Standard Charge Mortgages?
Home is your one of the largest and most important financial transaction you will ever make. When you take the mortgage loan from Banks, it is secured by real property such as a house. Bank will obtain mortgage security that will be registered on title against your home in the appropriate land registry office. This is referred to as the registration of a mortgage or a "charge".
There are 2 types of "charge" in the industry that Bank may register either Collateral Charge or Standrad/Conventional Charge. Depending on this type of charge, you can either do transfer/switch or refinance of mortgage at time of renewal.
A Transfer/Switch is usually only possible if all the key elements and terms of the mortgage loan remain unchanged (e.g. amount owing, ownership of the home, etc.) when moving existing mortgage to new Bank without any appraisal or legal cost to you. Registration of title involves assigning existing mortgage to new Bank.
A Refinance means that you are changing the land title registration, amount owing or ownership of the home,etc when moving existing mortgage to new Bank and there is both appraisal and legal cost involved. Registration of title involves discharging the existing mortgage and registering the new mortgage.
We have outlined the benefits and differences between Collateral Charge and Standard Charge as we have access to 20+ Financial Institutions to provide you multiple options for your mortgage needs.
Collateral charge is registered usually for an amount that is greater than the actual amount of the mortgage loan. This collateral charge may secure other debt such as secured line of credit besides the mortgage loan and additional terms of the loan specific to the Bank
Standard charge is registered for the actual amount of the mortgage loan. This standard charge secure only the mortgage loan
Provides the flexibility of multiple component mortgage such as combination of Fixed, Variable closed and Secured Line of Credit
Only allows single component mortgage either Fixed or Variable closed
Provides the flexibility to borrow additional funds from existing bank as long as you do not exceed the amount registered on title possibly avoid you from paying new legal cost. You will need to apply and qualify for additional funds. Contrary, this may limit borrowing additional funds from new bank as second charge
To borrow aditional funds from existing bank will need to register new increased mortgage on title and incur new legal costs. You will need to apply and qualify for additional funds. Contrary, this allows borrowing additional funds from new bank as second charge
Most Banks do not accept collateral charge mortgage
Most Banks accepts standard charge mortgage
Can only do Refinance option
Provides the flexibility of either Transfer/Switch or Refinance options
Will require to assess the value of property when moving mortgage to new Bank. This may cause potential issue if market value is down and refinance may not cover your existing mortgage
May not require to assess the value of property when moving mortgage to new Bank. This may not be an issue if market value is down
Will incur appraisal and legal costs when transferring existing mortgage to new Bank
Will not incur any cost when transferring existing mortgage to new Bank
Hope this information provides you with better understanding what we as mortgage brokers actually do. If you are in the market to buy a home, or if your current mortgage is up for renewal or finally, if you are looking to refinance your existing one, contact us today! We would be happy to help you on your path as a homeowner â€“ it is what we love to do.
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