Understanding collateral charge mortgages
When a house is used as security for a loan, mortgage security will be registered on the title of the house in the applicable land registry office. This is commonly known as a “charge” or a “mortgage”. This charge gives the lender the legal right to take action against you and the house if the loan is in default. There are two types of charges that can be registered by a lender: conventional (or standard) and collateral. At Tangerine, our Mortgages are registered as a collateral charge.
What are the differences between collateral and conventional charge mortgages?
Conventional charge mortgage
Collateral charge mortgage
The loan amount
100% of the property value
Specific details of mortgage loan
Includes amount, interest rate and payments.
Details are included in the charge that is registered against your house.
Details are not included in the charge registered against your house. A separate credit agreement contains these details.
Refinancing requires the discharge of the existing charge and the registration of a new charge, requiring a lawyer, and legal costs are incurred. footnote *
Refinancing up to the charge amount may be possible without incurring legal costs. footnote *
Home Equity Line of Credit
Adding the loan requires the registration of another charge, a lawyer, and legal costs are incurred. footnote *
Adding the loan under the current charge may be possible without incurring legal costs. footnote *
Flexibility of transfer
Transferring to another lender may be possible done without incurring legal costs. footnote *
Transferring to another lender involves the discharge of the existing charge and the registration of a new charge, requiring a lawyer, and legal costs are incurred. footnote *
Discharging the charge
Depending on the lender, once the loan is repaid in full, the lender will either discharge the charge on your request or automatically.
If there are other loans secured by the collateral charge after you have repaid your mortgage loan in full, you can only request a discharge when you have repaid all the loans secured by the collateral mortgage.
To learn more about mortgage security, visit the Canadian Bankers Association
footnote *Subject to application approval under current Tangerine credit criteria. For properties located in Quebec, a new hypothec registration (with associated legal, administrative and registration costs) may be required.