605 Brock Street N, Unit 12 Whitby, Ontario L1N8R2
Shopping Cart
Your Cart is Empty
Quantity:
Subtotal
Taxes
Shipping
Total
Canadian Mortgage News
Blog
TD Takes Heat for its Collateral Mortgages
| Posted on January 30, 2013 at 10:50 AM |
Author: Rob McLister, CMT Published: January 28, 2013 Link to original article provided below Collateral charge mortgages got more bad press on Friday after CBC’s Marketplace ran this report.
The gist of it is that collateral mortgages "effectively trap you at the bank," says the CBC (which is not entirely true… more on that below).
TD Canada Trust, which sells only collateral charge
mortgages, was caught in CBC’s crosshairs. An undercover reporter went
into a TD branch with a hidden camera, asking the mortgage rep what made
TD mortgages different than those at other banks.
After being questioned in four different ways, the TD rep finally disclosed that TD’s mortgage was a collateral charge, saying:
CBC approached TD corporate for comment, but TD apparently wouldn’t respond about its collateral mortgages on camera. Collateral charges are designed so that you don’t need to pay
refinance fees if you add more money to your mortgage. But they’re also
criticized because, in most cases, they force you to pay
legal/registration fees to switch to another lender (due to the way
they’re registered). In turn, that roadblock helps the lender retain
more customers. Even TD itself does not accept collateral mortgages from other
lenders. In its mortgage guidelines (which we obtained freely off the
Internet) TD says: “Collateral mortgages (e.g. Manulife One accounts and
Scotia Total Equity Plan accounts) are secured by collateral mortgages
and cannot be transferred [to TD].” It should be noted, however, that a handful of lenders currently pay
legal fees to attract business from people with collateral mortgages.
ICICI Bank (for status brokers) and Royal Bank (according to a rep we
spoke with) are two such lenders. One of the bones CBC picked with TD was that its collateral
registration is not disclosed to clients until the customer is signing
in the lawyer’s office, at which point it's too late to switch lenders.
CBC might have been referring to old documentation, however, because
TD’s approvals now clearly disclose that their mortgages are a
“COLLATERAL CHARGE.” (Whether the borrower reads this disclosure and
understands it, and whether the TD rep or broker explains what it means,
are separate issues.) Collateral mortgages are useful and can save you roughly $500 to $800 in legal costs if you:
But they also have potential drawbacks, over and above the additional switching cost:
A number of other lenders sell collateral charge mortgages besides
TD. They do so even if the borrower wants just a regular mortgage with
no line of credit. Such lenders include ING Direct, National Bank and
various credit unions, for example. And most of these lenders don’t give
you an option to refuse this type of registration. All in all, collateral mortgages are right for some but clearly
unsuitable for many. A few years ago, TD said that “20 times” as many
customers refinanced with them versus leaving for another lender. But
that figure has to be less now, given that government rules prohibit
refinances above 80% loan-to-value, and given that home price appreciation isn't what it used to be. To that extent, the net benefit of collateral mortgages is questionable for most of today's borrowers. Rob McLister, CMT |
Categories: McLister
Post a Comment
Oops!
The words you entered did not match the given text. Please try again.
2 Comments
Reply
Gold Physical Tips
6:22 AM on June 28, 2013
I love this website and will absolutely share it with others. It's refreshing to find something of this magnitude. Keep up the interesting work!
Reply
Commodity Tips
6:19 AM on July 17, 2013
Hello There! I love reading your blog; I’ve been here several times and wanted to express my gratitude towards your efforts. This is quite interesting. I’m glad that I came across something like this.
Oops!
Oops, you forgot something.