Ways to Register Mortgage in Ontario

Mortgage lenders register what is known as a “charge” on your land’s title or deed as a means of securing the mortgage against your property. With a charge, you cannot make any changes to the charged title (such as selling it) without notifying the lender.

In Ontario, mortgages are registered on title either as standard charge or collateral charge. Standard charge has been used by all lenders as the primary method of mortgage registration. However, more and more lenders are shifting to collateral charge, especially the big banks.

Different types of mortgages work for different people. A certified mortgage broker will help you understand what best works for you and how to hunt for the same. So, what is the difference between the two types of charges/liens?

Standard Charge Mortgage

With a Standard charge mortgage, you can switch or renew to another lender without incurring legal fees. This gives you flexibility in terms of switching lenders. This switching is called an “assignment”. Your new lender may cover some or all the costs associated with switching lenders. You can also negotiate a favorable renewal rate with your current lender and you save between $600 and $1,000 that you would have paid in collateral charge mortgage legal fees.

A standard charge mortgage is registered for the original amount borrowed. As an example, if you require a mortgage loan of $250,000 for a home that costs $280,000, the lender will register the standard charge for $250,000. This means less home equity.

Should you need or want to borrow additional funds, you can arrange a new “second position” mortgage (usually at a higher interest rate) or cancel the current mortgage and replace it with a new one. In both cases, you expect to pay the appraisal and legal fees for the new lending.

Collateral Charge Mortgage

With collateral charge mortgage, the mortgage is non-transferrable to other lenders during the renewal. This means that should you choose to move to a different lender, you will start afresh, including paying legal fees, to register the new mortgage. The legal fees are usually between $600 and $1,000.

A collateral charge mortgage is registered at 100% to 125% of the value of the property. This is a big benefit for those looking to access home equity for such things as debt consolidation, renovation, and investment as no legal fees are incurred. However, you should note that the more you tap into the limit, the harder it is to get a new mortgage at renewal.

Once the charge is registered and you have the initial loan, you can only borrow the value of the collateral charge or a maximum of 80% of your home equity, whichever is lower. Should you pay down your mortgage and the value of the home increases, you can borrow the additional funds.

You can use your home equity to guarantee other forms of credit like lines of credit, car loans, and credit cards from the same lender.

Choosing between mortgages can be a daunting task. Our mortgage brokers will assist you to find the most favorable solution.