Collateral mortgages are increasingly popular because it makes it harder for you to change lenders at the end of your term.
The banks will tell you that this will allow them to extend different loans to you without additional legal fees. This is true, but at the same time it prevents anybody else from lending money to you based on the equity of your home.
These mortgages are sometimes registered to 150% of the value of your home. If your home is worth $1,000,000 and you borrow $650,000, they can register a charge of $1,500,000 against your house. This means it will prevent you from getting a loan elsewhere based on the equity of your house now and far into the future. It is not so bad, if they can lend you the money when you need it, but often you don’t qualify. You might qualify at another lender, but your equity is all locked up.
This is exactly what happened to Shawn and Heather Aberle. Click here to see the story. If they had gone to a non-bank lender that registers a conventional mortgage, they would not be faced with this problem.
When you get a mortgage you need to talk to someone who can assess whether a collateral mortgage is right for you. Unfortunately, the person on the other side of desk at the bank is probably not the one to talk to. Especially if they only sell collateral mortgages. Buyers beware!
Alternative lending.ca help people with difficult situations get financing and people in good financial situations get better financing through non-bank lenders. We operate out of Vancouver, BC, but can assist people in all of BC and selected locations in Alberta, Manitoba and Saskatchewan.
