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28 Mar

TD Canada Trust Mortgages….Hand-cuffs Included

General

Posted by: Mike Hattim

TD Canada Trust is registering all mortgages as collateral charges.

What does this mean for the consumer?  Well, there is some good but mainly it’s bad..…

  • a collateral mortgage is normally registered for floating or revolving debt such as a secured line of credit.  It allows for the balance to float up or down.
  • TD will register a collateral charge for 125% of the loan amount… this will allow the client to come back at a later date and apply to increase their mortgage if needed….
  • in theory, it sounds great…no legal fees required in the future if you need to refinance… and easy approval…

BUT HOLD ON…

  • a COLLATERAL MORTGAGE is NOT really portable…meaning you cannot transfer to another institution…that’s because no other Bank or Lender is accepting collateral mortgages for transfer… including TD…you will lose some leverage to negotiate the rate when your mortgage matures…
  • and if you wanted to increase your mortgage in the future, you would need to reapply for approval…let’s suppose you don’t qualify in the future..not because your situation changed but because the Bank’s lending policy changes…this happens regularly….you would now have to seek out an entirely  new 1st mortgage as no other lender would register a 2nd mortgage in behind a collateral first mortgage (at least none that I am aware of)…  that could mean penalties, definitely legal fees and other costs….
  • It’s obvious that a big reason TD would be doing this is to improve mortgage retention.. this makes it less appealing to leave TD because of the costs….
  • BOTTOM LINE…this type of mortgage limits your options..it doesn’t expand them.. you MAY save on legal fees..but that’s not a big enough reason to go with this product..

My advise to anyone looking at a TD mortgage is to be careful…make sure you understand all the terms, conditions, the differences and the limitations…you be the judge… is this a good thing for the client or is it a good thing for the Bank??  Will other Banks follow?  Some might say this is like putting handcuffs on the client… I tend to agree…