TD Mortgages To Become Collateral Charges



Photo by Bobcatnorth TD is making a big change with respect to how it registers its mortgages. 

Effective October 18, all new TD mortgages will be registered as “collateral charges.”

A collateral charge is a different way to secure a home loan than a standard mortgage. "The terms of a collateral mortgage are outlined in a loan agreement that's not registered," says Invis's Gary Siegle. "With a regular mortgage, the terms are in a 'registered document'."

Effectively, collateral charges allow lenders to change the interest rate and/or loan more money to qualified borrowers after closing, without involving a lawyer.* That saves the borrower legal costs if he/she needs to withdraw equity from their home.

In TD’s case, customers will now be able to register their mortgage for up to 125% of the value at closing. Hence, if one’s property value goes from $200,000 to $250,000, qualified borrowers will be able to withdraw most of that new equity without refinancing. 

"If I'm a consumer and I'm told that I can get more money in the next few years without extra cost, I would think most consumers would find that appealing," says Siegle.

The downside comes at renewal. For consumers who want to keep their options open at maturity, this is an unfriendly change. That’s because TD customers will now have to pay legal fees to switch lenders.

Obviously, people switch lenders for many reasons, not the least of which is better rates or features.  And, with most other lenders, you can switch your mortgage for free, save for the discharge fee or other minor charges. 

From our own informal polls, many industry observers we’ve spoken with view this change largely as a strategy to retain customers at renewal.  If this is TD’s intention, they’re definitely not the first lender to think this way. There are various credit unions, for example, that register all of their mortgages as collateral charges.  There are also banks that push readvanceable mortgages (which also use collateral charges), for similar reasons.  TD itself has used collateral charges with its variable and HELOC products for a while.

For now, it’s difficult to assess the impact of this change.  Everyone needs to renew, but not everyone needs to refinance. So TD’s move will benefit some while hurting others. 

On the other hand, most mortgagors renew with their existing lender anyway, so the number of TD customers who refinance may be higher than the number of people leaving TD at renewal. 

That depends on the term, of course. Someone in 1-year fixed has a low probability of refinancing. So, other things being equal, TD will now be a less attractive option for standard 1- to 3-year terms.

In any event, TD customers need to be aware of both the pros and cons of this move. 

One thing we’re not certain of at this time, is how existing TD mortgages will be affected.  TD spokesperson Kelly Hechler said TD would release a clarification on this soon.

We’ll post more information in the comments section as it becomes available.

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*  A collateral charge generally doesn’t allow a lender to change a fixed rate or the discount on a variable-rate mortgage. However, it does allow the lender to change the rate if you ask for more money later, or if you have a line of credit portion with a floating rate.

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Update – Oct. 8:  TD has confirmed that this change will not affect existing TD mortgages that close before October 18.

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Comments

  1. Comment avatar

    Lorne C    

    A collateral mortgage is exempt from the provisions of the Interest Act with respect to compounding. This may mean a TD mortgage will be compounded MONTHLY as opposed to semi-annually.

     
  2. Comment avatar

    Ryan Kirwan    

    Another thing that was brought to my attention was in regards to the reporting of the mortgage with the Credit Bureau — I had a client that was NOT too happy to find out his WHOLE MORTGAGE was now affecting his ability to borrow!!! This could be a major negative for BFS!!!

     
  3. Comment avatar

    LeoLeeAMP    

    So how comfortable is that big Green Armchair now! I wonder if the competition board should take a look at this trend in the industry.

     
  4. Comment avatar

    T4me    

    TD’s variable mortgage is already compounded monthly. The difference isn’t that big versus semi-annual. Over five years, monthly compounding costs $122 more on a $200k 2.5% mortgage.
    I guess it adds up though, especially if you’re talking about hundreds of thousands of mortgages at TD.

     
  5. Comment avatar

    Bob W    

    The truth is that the majority of clients take traditional style mtgs. I think the majority of those looking for re-advancable mtgs. trend towards mtgs. with HELOC’s attached. For a traditional style mtg I would not allow my clients to fall into this potential ‘Sand Trap’ without fully discussing the Terms and Options first!
    Think about the wisdom of registering a simple traditional longer term mtg for 125% of the current home value… Let’s assume down the road, this client is presented with a situation where they are looking to access their equity, however circumstances are such that they don’t quite meet TD guidelines. Unfortunately for this client with a Global limit that has been registered artificially high, it’s unlikely that I/we would be in a position to place Secondary financing behind this mtg. This client would now be faced with the prospect of having to discharge their TD mtg. and re-registering a new one with a Lender that may accept these clients 1st mtg (perhaps at higher interest rates) and don’t leave out the fact that these clients would now have to pay an early discharge penalty… This is prior to us even starting to look at arranging Secondary financing! Obviously for this traditional mtg client, they never saw this coming and it would turn out to be costly…
    Thank goodness for choice! Speaking of choice, Perhaps a TD Road Rep or TD employee might like to join a Firm like mine as we are always looking for good people, and unlike TD, we have a myriad of mortgage options to recommend to our clients.

     
  6. Comment avatar

    Mike Adams    

    I can’t believe that a potential TD client would not be given the choice of having their mortgage registered as a ‘Regular Charge’ or a ‘Collateral Charge”?
    From reading this Blog, the first thing I have given up would my strength in negotiating a better deal when it comes to taking advantage of Shopping for better rates at maturity. I don’t see why TD would offer me a ‘Deep Discounted Rate’ to retain my business because they know I can’t do a “No Fee Switch” and legal fees to transfer will cost me up to $1,000
    This is not about offering a better product… It is about retaining a mortgage portfolio and higher profits!
    Their mortgage rate is the same as other Bank’s (the last time I checked) so why would I do this. Especially if it has been explained in a straight forward manor as you have done!
    THANKS

     
  7. Comment avatar

    Dan    

    Correct me if I’m wrong, but from Oct 18 TD will be able to change interest rate on a loan portion since on collateral charge interest is set monthly – demand loan. Plus I wouldn’t trust TD since they known to do this – everybody remember HELOC change from Prime to P+1%.

     
  8. Comment avatar

    Stevie G, Mississauga, On    

    I have a couple of questions:
    If all of the TD mortgages are going to be Collateral mortgages, that means my mortgage terms and conditions can be changed without re-registering. Sort of like what they did with my Secured Line of Credit that went from Prime to Prime +1%.
    What happens if down the road, I take advantage of accessing my increased equity but the property value declines, like what we saw in the 1990’s. My mortgage at maturity could easily be a High Ratio mortgage without being insured as one. Does this mean my mtg may not be renewed under the same terms and conditions? Will I have one of those USA style Orphaned Mortgages?
    Speaking of the USA, isn’t what TD is doing, kind of similar to what the USA did, and something our government has been addressing with new rules that makes it harder for us to access our home equity like an ATM? What’s going on with that?

     
  9. Comment avatar

    Mike    

    Were did you get the information that TD customers will now have to pay legal fees to switch lenders?

     
  10. Comment avatar

    bob    

    Because Collateral Charges Can not be swiched into another lender using a no fee transfer, without being paid off (Unlike a Regular Charge) Ask TD if they will accept a no fee Transfer-In of a Collateral Charge… Their answer is NO, just like every other lender

     
  11. Comment avatar

    banker in an ivory tower    

    If TD is now dealing only in Collateral charge loans what does that mean for someone wishing to transfer their conventional standard charge mortgage to the TD?

     
  12. Comment avatar

    Robert McLister    

    Hi Banker, I don’t know for sure but I’m guessing that TD will keep their “free switch” policy for incoming new customers. -Rob

     
  13. Comment avatar

    Deb    

    I have already checked with TD. They will take your mortgages from you with open arms… You just won’t be Switching in any of their new mortgages!
    Where is ‘In the customer’s best interests’ being served by this move?

     
  14. Comment avatar

    Pete    

    Good point about not being able to do a 2nd mortgage somewhere else. TD’s mortgages are a mousetrap and don’t be suprised if they use low rates as the “cheese.”

     
  15. Comment avatar

    rbc    

    rbc does the same thing…….. old news

     
  16. Comment avatar

    takloo    

    not true, by law mortgages in Canada can only be compounded semi-annually… fixed or variable.

     
  17. Comment avatar

    takloo    

    the more I read about these fancy credit products, the more I feel we are moving towards lending in US… as long as clients are educated and fully understand the risks of these products, we might be ok.

     
  18. Comment avatar

    jj    

    Takloo: You are wrong. Collateral loans are not subject to compounding limitations. That is why TD can get away with monthly compounding on its variable rate mortgage.

     
  19. Comment avatar

    Cameron    

    Scotia has been registering their STEP mortgage like this for years….

     
  20. Comment avatar

    Bob W    

    Hi Cameron & RBC you are correct (sort of), but we are not talking about a bundled mortgage products. TD is publicly devieting from what we have become used to and registering all of their Fixed rate mortgage products the same way as they do bundled products. I believe National Bank have tried something similar in the past.
    If it turns out to be a good or bad move to build and maintain their portfolio, time will tell. Until then, broker/agents can educate consumers and provide them with the choices.

     
  21. Comment avatar

    Bob W    

    Sorry, one last closing comment!
    Thank you TD for inadvertently providing the brokerage community with more ammunition to show the importance of consulting with a mortgage broker/agent to help consumers decide what mortgage product is best for their needs.

     
  22. Comment avatar

    David    

    Good point Stevie. TD is not obligated to renew people. Suppose you borrow more money and your home value falls below your mortgage balance. TD could refuse to renew you. You’d then have to cough up more equity or get foreclosed on. I see no benefit of this change unless TD guarantees it will renew you if you haven’t missed a payment.

     
  23. Comment avatar

    LH    

    Absolutely right, Bob. The problem is the percentage of people who consult is very small. Most borrowers out there are unaware of the tactics being used by the banks they trust.
    I’m not trying to vilify the banks here but rather just the way they do business. What I want to know is how come all this information isn’t being disclosed to a customer prior to signing the documents at the lawyer’s office?
    From my own experiences I would say ninety percent of people don’t even bother reading the entire disclosure. Would TD’s sales force tell their client upfront: “Oh, btw, with the way we register our mortgage, you may have a hard time getting a second mortgage” or “BTW, if you decide to go off the reservation, be prepared to pay heavy fees to switch”. It’s all disclosed in writing as the bank has to protect itself. It’s just hidden in a malaise of legal terms and fancy words that don’t make sense to people. I find that people are too complacent.
    If you have a portfolio of investments worth, say, $300,000, I’d say most people would want to know exactly what they’re getting into when they have this much money on the line. But with mortgages, homeowners are borrowing these huge amounts of money without fully knowing what they’re getting into. Just like Royal doesn’t disclose its variable mortgages are subject to an IRD and that weekly payments are compounded weekly, the banks never disclose their clients all these conditions when you meet with their sales force.
    After all, all the banks (as well as all other lenders) care about is getting the sale on their books. When the actual adviser works directly for the bank, their client is typically always in for a surprise.

     
  24. Comment avatar

    banker in an ivory tower    

    Excellent post and reply’s. What amazes me is how this insidious and self serving change to TD mortgages is not publicly broadcast? Shame on TD!
    The sad fact is, a majority of people continue to blindly trust their FI’s and for as long as they continue to, the FI’s will continue to capitialize on such naivety and confusion.
    Afterall, why would FI’s continue to mail out mortgage renewals at posted rates if a significant majority didn’t sign them?

     
  25. Comment avatar

    Arby    

    RBC registers their Homeline readvanceable product as a collateral charge. This is the only product registered this way as the standard mortgages are registered as traditional mortgages.

     
  26. Comment avatar

    Arby    

    …Just like Royal doesn’t disclose its variable mortgages are subject to an IRD…
    Uhh, wrong. Here is the exact wording from my mortgage disclosure legal docs “The prepayment charge on variable rate mortgages is the equivalent of three months’ interest at the client’s mortgage interest rate, calculated on the outstanding mortgage balance.
    When there is less than three months remaining in the term, the prepayment charge will be based on the number of months remaining in the term”
    How about you do some research before throwing wrong info around here.

     
  27. Comment avatar

    John H.    

    I think TD probably doesn’t want this to make the papers. Speaking of which, why hasn’t the press picked this up? This is major news IMO and I’m shocked that consumer watchdog agencies haven’t written about it.

     
  28. Comment avatar

    In Debt    

    Silly question. Why can’t you pay it off? Say you want to switch to BMO, can’t you get a mortgage at BMO and use the proceeds to pay off the TD collateral charge mortgage?

     
  29. Comment avatar

    Robert McLister    

    Yes, you can pay it off. No problem there. The issue is that it will cost you legal fees to transfer to another lender, whereas a regular mortgage could be switched with no legal cost.
    Cheers,
    Rob

     
  30. Comment avatar

    Arby    

    RBC is accepting switch in’s of secured credit lines from other Fi’s and covering Basic title insurance fees (legals), Appraisal, and one discharge fee per deal.

     
  31. Comment avatar

    Mailfornish    

    Effective Oct.18/10 – TD mortgages

     
  32. Comment avatar

    David Watts    

    The common practice is that there are legal fees to discharge a mortgage and switch to a new lender; regardless of if its a conventional or collateral mortgage. Very few people(at their option) switch lenders without also changing the principal, rate, term, etc; and they would incur these “legal fees” anyway. I don’t think paying legal fees to switch lenders is anything new; and certainly is not that expensive when considering differences in interest charged between banks or best rates offered. RBC’s Homeline product operates the same way; and people still pay those out and switch lenders.

     
  33. Comment avatar

    Lynn    

    There are never legal fees to
    “transfer” a standard mortgage. People only pay a laywer when purchasing or refinancing. There is a difference and the two shouldn’t be confused.

     
  34. Comment avatar

    Robert McLister    

    Hi David,
    There are generally no legal fees to transfer a conventional charge.
    I’d respectfully note that, contrary to your experience, it is very common for clients to switch a regular mortgage and pay no legal fees.
    Of course, if the mortgage includes a line of credit/collateral charge, then refinancing is typically mandatory.
    On a national level, however, our experience is that more people have standard charges than collateral charges. Therefore, the inability to switch for free is an issue to a lot of people.
    RM

     
  35. Comment avatar

    banker in an ivory tower    

    Robert said: if the mortgage includes a line of credit/collateral charge, then refinancing is typically mandatory.
    >>>>>>>>>>>>>>>>>>>>>>>>
    It’s actually not always mandatory to refinance when an existing HELOC is involved. If the HELOC was originally set up as a second and separate charge to the conventional mortgage, it stays second and no refinancing is involved, then you should be able to transfer just the mortgage without legal costs. That said, many lenders seemingly can’t be bothered with the complications involved with primary and secondary charges and wish to just close the existing charges and start with a new, single collateral charge for both the standard mortgage and HELOC.
    Typical for TD to exploit consumer confusion on this issue. Maybe we should not even be calling collateral charges, “Mortgages”. They are actually collateral “Loans” IMO

     
  36. Comment avatar

    Robert McLister    

    Hi Banker,
    You’ve just shown why I used the phrase “typically mandatory” instead of “always mandatory.” 🙂
    My reference actually applied to mortgages that “include” a line of credit and collateral charge.
    You are referring to separate first and second charges, which is a bit different.
    In the former case, I can’t think of any lender that accepts this type of combined mortgage/LOC as a no-fee transfer.
    In your scenario, a lender may accept the 1st mortgage transfer (at no fee) but refuse to let you keep the 2nd LOC. Depends on the situation.
    Cheers,
    Rob

     
  37. Comment avatar

    Darko    

    I have just talked to TD about renewal of my current mortgage (1-year closed at 2%), and they offered me a very competitive rate of 2.15% (again, for a one-year closed). I had this conversation prior to reading this post, so I am just wondering, how substantial are the refinancing fees referred to in the article, which I may have to cough up in one years time?

     
  38. Comment avatar

    mort. girl    

    If you need to refinance to switch lenders the legal fee could be $700 plus.

     
  39. Comment avatar

    Chris Wisniewski    

    Hi everyone, some good points here. I thought I should chime in and provide TD’s perspective.
    We’ve a lot of research with our customers to find ways to make our mortgages more flexible for their changing needs. One of the things we found out was that customers are 20 times more likely to want to refinance their mortgage with us, than they are likely to switch to another lender using an assignment of mortgage. Since most of our customers want the option to refinance with us, and since most choose to increase their borrowing when they do, we looked for a way to allow them that flexibility without having to pay additional costs. Using this collateral charge could remove the registration cost associated with increasing or refinancing a mortgage and we believe the vast majority of our customers will appreciate this savings.
    We have made no changes to our lending policies. With this documentation change, if a customer wants to refinance they still need to apply and qualify as they would today. We are providing qualified customers with the option to register up to 125% of the property value, so if they need to borrow more in the future and would like to use their home as security, they can avoid additional registration costs. This is all subject to our normal lending criteria and the property value must support the increased borrowing. In other words, if the value of a home doesn’t support the increase, then we won’t provide it.
    I also wanted to address the “assignability” issue. If a traditional mortgage charge is “assigned” the customer must make an application to the new lender. The new lender must go through its own credit approval process, pay out the existing mortgage loan and will need to register the assignment. No new money is advanced. This has its limitations however, in cases where the customer wants to increase borrowing at the time of refinancing with another lender or switch to a home equity line of credit. At that point they will face the additional registration costs.
    This new collateral charge is assignable, however, most institutions do not yet (and I stress yet) utilize the assignment capabilities of a collateral charge. We are looking at our own policies, and now that we are using collateral mortgages in this way, we’re looking at widening the types of mortgage we will take assignments of.
    Before I go, I wanted to clarify a few facts about TD mortgage loans that are secured by collateral charges:
    · Only one product at a time can be secured by the collateral charge — they remain exclusively mortgages and the collateral charge does not cover any other debt owed to the bank
    · We can’t change your rate at anytime — the interest rate on the mortgage loan can only be changed if the customer signs a renewal of the mortgage loan (just the way a traditional mortgage works now)
    · It’s not true that registering for up to 125% of the value of the mortgage ties up the equity, and the amount of the charge is not necessarily relevant. It depends on what steps the second lender chooses to take.
    Sorry for the long post, but with all the incorrect assumptions out there, I thought it was important to be as detailed as possible. Your home is your biggest investment and it’s important to put a lot of thought into how you finance it and how you use it. Ask questions, talk to your bank and consider all your options.
    Chris Wisniewski
    Associate Vice President, Real Estate Secured Lending, TD Canada Trust

     
  40. Comment avatar

    EastCoast3323    

    WOW Chris that’s great. thank’s for sharing the actual facts!
    Sounds like a long term benefit for everyone considering a mtg.

     
  41. Comment avatar

    Robert McLister    

    Hi Chris,
    Appreciate the clarifications and the different angle on things.
    Like you mention, most institutions won’t cover registration costs on a switch involving a collateral charge. So it’s interesting to hear hints that this may someday change (assuming I’m not misunderstanding you).
    Do you forsee TD accepting other lenders’ collateral charges (such as readvanceable mortgages) anytime soon?
    Cheers,
    Rob

     
  42. Comment avatar

    dave    

    Yah! TD is the best bank ever!!! woo-hoo!!

     
  43. Comment avatar

    Bob    

    Have you hovered your mouse over EastCoast3323 ??… Yes, that points directly back to TD (just like Chris Wisniewski’s post) who by the way, is saying the the same spiel on other Blogs.
    Either busy setting the record straight, or damage control.
    Looks like EastCoast3323 and many of the other TD Reps have bought into the benefits…. That is until their clients ask for limit increases instead of refinancing and it hits them in the pocket book when their compensation drops by 20% +/- Because apparently TD focuses on Refinances (both new and existing business) and simple switch mtgs make up a minimal part of their business plan.

     
  44. Comment avatar

    LT    

    The following is an excerpt from a posting in a local paper of a consumer who has seen the fine print of TD’s Collateral Mortgage.
    “We have learned this week TD Canada Trust has begun registering all of its new mortgages as collateral mortgages instead of as conventional mortgages.
    This means your mortgage is a loan backed by your promissory note, so you can now borrow more than your house is worth.
    One of the items in the fine print is that if you miss a payment, the bank has the right to impose a higher interest rate on you for the life of the loan.
    This is not the case if you have a conventional mortgage.
    Another consequence of this type of mortgage is that when the mortgages renews, you cannot just go get a mortgage from someone else.
    You have to pay this one off first because it’s a loan — and the fees to do so are much greater than those with a conventional mortgage.
    Furthermore, if you miss a payment, the bank can take money out of your other accounts without first asking you.
    Other banks are watching this development closely.
    If TD Canada Trust is not punished in any way for following the American sub-prime mortgage lead, other banks will follow.
    With housing values falling all over Canada, is this a good idea? No.
    But who will stop them? No one.
    You have been warned.

     
  45. Comment avatar

    Cold in Regina    

    TD made a big mistake. This will cost TD the broker community and turn off customers who don’t like being hogtied by their bank.

     
  46. Comment avatar

    Mike S    

    Another consequence of this type of mortgage is that when the mortgages renews, you cannot just go get a mortgage from someone else.
    You have to pay this one off first because it’s a loan — and the fees to do so are much greater than those with a conventional mortgage.

    Really? Please specify what additional fees they charge to pay off the mortgage.

     
  47. Comment avatar

    Jim    

    With this change, TD wil now have the powr to raise your interest rate to whatever they feel like if you miss a payment or two, just like credit card comps. can do. This is incredibly bad for all Canadians. It also means that because you can borrow up to 125% of the homes value, TD can get around the “legal” loan/value ratio that is dictated by the Gov. (ie, homes need appraisal before a mortgage can be issued). In summery, brace for US style baking and housing collapse.

     
  48. Comment avatar

    Robert McLister    

    Jim,
    There are some corrections needed in your statements:
    TD has confirmed that it cannot change a person’s rate at anytime. They state, and I quote: “The interest rate on the mortgage loan can only be changed if the customer signs a renewal of the mortgage loan (just the way a traditional mortgage works now).”
    In addition, collateral charges in no way allow TD to skirt federal loan-to-value regulations. Mortgages must still be insured based on the loan amount and the insurer/lender’s lending value of the property.

     
  49. Comment avatar

    Jon    

    I believe credit unions have been doing this for years. ATB Financial register either the loan amount or the appraised amount. the client can borrow up to the amount without incurring the re-registration fees as long as the equity is still there. it does limit the client getting a 2nd mortgage, when they have full appraisal registration. ATB allows multiple mortgages under the same registration

     
  50. Comment avatar

    Derricktse@hotmail.com    

    Hi guys,
    Thanks for all the informative comments. I am currently looking at getting a mortgage and I have one question.
    If I go with td (collateral mortgage), will this affect my future borrowing opportunities with other financial institutions. My concern is that if for example I apply for a second mortgage or even a car loan at another bank, will they see on my credit bureau that I have a huge line and decline my application.
    Any thoughts will be greatly appreciated. I’m new to this whole home buying thing.
    My current purchase price is 697,000$. I intend to make a downpayment of 200,000$. With a collateral mortgage, this means they will register a minimum of 697,000$ (with option to go 25% above).

     
  51. Comment avatar

    broker99    

    I don’t think TD’s collateral mortgage would hurt your credit score compared to a regular mortgage of the same amount. Then again, I would call and ask them to be safe.

     
  52. Comment avatar

    jason    

    Derricktse@hotmail.com
    You need to make a distinction between the charge registered on title and what type of mortgage you get. The charge on title does not get registered on your credit bureau but the type of mortgage you get will. If you are approved for a $497,000 mortgage or line of credit,that will show on your bureau, but even if they registered a million dollar charge on title, that will not show on a credit bureau.

     
  53. Comment avatar

    AL    

    As a lender, we look at the registered amount of a first mortgage before advancing a second.
    If the first mortgage is registered for more than the outstanding balance, taking reasonable amortization into account, we request that the charge be modified to the balance before we proceed with our new second mortgage.
    For example, if a property is worth $200,000.00, the balance is $100,000.00, and it is registered for $100,000.00, we would have no issue with lending our second mortgage for $50,000.00 at 75% LTV. However, if the same property has the same balance but the charge is registered for $150,000.00 or more, we would not proceed with our loan.
    A few lawyers have provided opinions confirming that our funds, advanced behind the bank’s current balance, would take priorty over any funds subsequently advanced under the bank’s global limit. I am not, however, prepared to risk getting into a legal tangle over it.
    That being said, we routinely offer to register for a higher amount to faciliate future draws–but the borrowers have a choice in the matter!

     
  54. Comment avatar

    Robert McLister    

    Hi AL,
    Thanks for the very relevant points, particularly these:
    * Your findings that funds advanced inbetween TD’s 1st mortgage and subsequent TD advances would potentially hold a 2nd position ranking (as opposed to 3rd position).
    * The importance of customer choice in determining how their mortgage is registered. That’s so important in our view, and the only choice a customer has with TD (if they want the benefits of a non-collateral mortgage) is to choose a different lender altogether.
    Cheers,
    Rob

     
  55. Comment avatar

    Bob    

    Have very many of you obtained copies of TD’s Collateral Mortgage document?
    There are a number of components clients may never see, apart from the obvious… Payable ON DEMAND, and Interest is payable on overdue Interest, before and after demand, default and judgment… payable under this Charge at the aforesaid Interest Rate. (Box (9)(c) Interest @ Prime + 10%
    Take a read, I am sure this clause will get your attention…
    16. BANK MAY APPROPRIATE PAYMENTS TO ANY DEBT
    “It is hereby agreed that the Bank shall have the right at any time to appropriate any payment made as a temporary or permanent reduction of any portion of the Indebtedness whether the same be represented by open account, overdraft or by any bills, notes or other instruments and whether then due or to become due and may from time to time revoke or alter such appropriation and appropriate such payment as a temporary or permanent reduction of any other portion of the Indebtedness as in its sole and uncontrolled discretion it may see fit.”
    OUCH!

     
  56. Comment avatar

    Mary Anne    

    Hi Bob, We are going in to sign our mortgage at TD next week. What does this mean to us in laymans terms? Thank you.

     
  57. Comment avatar

    Bob    

    I hope TD have offered you a VERY compeditive rate, as you will not be able to switch the mortgage out of TD at maturity without having to pay legal fees. This is because currently, all of the major Bank’s do not accept Collateral Charges under their no-fee transfer in programs. (Including TD) Should you get into financial difficulty down the road or your situation changes, your options will be limited.
    If you have time before you close on your new mortgage, I would call a local mtg Broker who can help by talking with you about various mtg products and options and then you will be in a better position to make a decision they are offering you.

     
  58. Comment avatar

    Titleist    

    What good are TD collateral charge mortgages now that you can’t refinance over 85% of your home value?

     
  59. Comment avatar

    tcm1    

    My variable rate mortgage at TD is up for renewal soon so I spoke with a TD consultant who said I would have to pay $495 “legal fees” that “go to the government” to renew my mortgage with them. And the fee would be regardless whether I just roll over the balance or increase the mortgage amount.
    From what I am learning here about their new way of offering mortgages upon maturity of my new mortgage I will be on the hook to accept their offer (which probably will not be the best) or pay more fees to renew the mortgage with another FI.
    If that is the case what is the incentive of renewing my mortgage with TD now? All they offer me is the current advertised rate for 4-year fixed at 2.99% It is a great rate for such mortgage but other big banks offer the same rate right now.
    Am I missing something? Should I just get the new mortgage elsewhere while the 2.99% rate lasts? I though I would have to pay some fees if I move my mortgage to another FI even at maturity. But if there are no fees (at least payable by the borrower) how dare the TD to ask me for $495?
    The consultant at TD claimed this charge is something new and I would have to pay it to a FI to register the mortgage no matter where I go. Is that true?
    Thanks.

     
  60. Comment avatar

    pixie    

    Isn’t FirstLine mortgages now also a collateral charge? Is it the same problem as with TD’s product?
    Asking because I’m just about to sign my life away.

     
  61. Comment avatar

    banker in an ivory tower    

    tcm1, what is the $495 fee for? If your just renewing there should be no change to the legal structure of your mortgage.
    I suggest you contact the bank and ask for a written payout statement as of the last day of the mortgage. If that doesn’t spook them into action, then take the payout statement to a trusted mortgage professional and see what they can do.

     
  62. Comment avatar

    Dusty    

    @pixie
    Only Firstline’s Matrix mortgage is collateral AFAIK

     
  63. Comment avatar

    tcm1    

    Thank you for the advice, banker in an ivory tower. I have emailed the financial advisor at TD to request the payout statement and full disclosure of the terms and conditions for the new mortgage.
    He claimed that the $495 fee was some sort of legal fee to register the mortgage with a government agency (under PPSA, I guess) and there was no way to waive it. So he wants me to get into the collateral mortgage trap and pay for my way there myself. He also mentioned something about me being on the variable rate and renewing on a fixed is like getting a new mortgage. Though I doubt it is true.
    On the phone, before our meeting and before the 2.99% fixed offer was announced, the advisor was trying to pull a few cheap sales tricks one would normally expect at a car dealership like “get it today because the rate will go up soon”, “I went a long way just for you to speak to my manager to offer you a 0.05% discount”, “you will not find a lower rate anywhere, I know that” (when the advertised rate at other big five + ING competitors was lower), “we offer great investment products you will not get elsewhere” (most of us know the big banks do not pay much on retail investments) . At the meeting when I asked about those “great investment products” with guaranteed return he showed me the 5-year Security GIC Plus with 5.1% minimum return. There was not much information on his screen so I asked how is it possible for a bank to offer me a 5.1% GIC and a 3% mortgage at the same time. He could not find what to say and just smiled. Later on the TD web site I found that GIC which actually pays only 1% yearly return with a 5.1% total return over 5 years. This fine print was not on the advisor’s screen. What a scammer! Are most “advisors” at the banks like that or I just had a bad luck and if I am to do any business with TD I should go to another one?
    You might ask why I went to discuss my mortgage with the advisor after all that. When the 2.99% fixed mortgage was announced I decided to get it since the fixed rate will probably not get any better and the new variable right now is ridiculously high at prime or prime +0.1%. I thought it would be less hassle and no fees if I just renew it with the same lender. Unfortunately it proved to be false in my case.
    ING has recently followed the TD’s move and started to offer all their new mortgages as collateral. They do not even have the 2.99% or better rate as of today. That leaves fewer choices for regular folks who just want to renew and eventually pay off their mortgages without tapping into their home equity over and over again. Does anyone actually offer a fixed 3-5 year conventional mortgage at or below 2.99%? I have read RBC has a lot of restrictions but is it a collateral mortgage as well? What about BMO? Or Scotia with 3-year 2.89% mortgage?
    How we, average Joes, can help the situation and force the banks to offer consumers a choice of conventional or collateral mortgage with the same interest rate? One way is to take our business elsewhere. But from what I am seeing the major lenders are moving towards the collateral mortgages and in a few years there may be no conventional mortgage options left with reasonable rates and conditions. Can the government be asked to regulate them in the interest of the people?
    Sorry for the long post.

     
  64. Comment avatar

    tcm1    

    Thank you for the advice, banker in an ivory tower. I have emailed the financial advisor at TD to request the payout statement and full disclosure of the terms and conditions for the new mortgage.
    He claimed that the $495 fee was some sort of legal fee to register the mortgage with a government agency (under PPSA, I guess) and there was no way to waive it. So he wants me to get into the collateral mortgage trap and pay for my way there myself. He also mentioned something about me being on the variable rate and renewing on a fixed is like getting a new mortgage. Though I doubt it is true.

     
  65. Comment avatar

    tcm1    

    ING has recently followed the TD’s move and started to offer all their new mortgages as collateral. They do not even have the 2.99% or better rate as of today. That leaves fewer choices for regular folks who just want to renew and eventually pay off their mortgages without tapping into their home equity over and over again. Does anyone actually offer a fixed 3-5 year conventional mortgage at or below 2.99%? I have read RBC has a lot of restrictions but is it a collateral mortgage as well? What about BMO? Or Scotia with 3-year 2.89% mortgage?

     
  66. Comment avatar

    tcm1    

    How we, average Joes, can help the situation and force the banks to offer consumers a choice of conventional or collateral mortgage with the same interest rate? One way is to take our business elsewhere. But from what I am seeing the major lenders are moving towards the collateral mortgages and in a few years there may be no conventional mortgage options left with reasonable rates and conditions. Can the government be asked to regulate them in the interest of the people?

     
  67. Comment avatar

    Dave    

    tcm1:
    Your mortgage will not be collateral if you have a standard mortgage charge and switch to ING. It is only if you refinance or purchase that an ING mortgage is collateral.
    From what I understand TD’s variable rate mortgages have been collateral charges for a long time. Maybe that has something to do with why they are making you pay legal fees to go fixed. Why don’t you get an explanation from TD in writing and post it here?
    As for RBC, only its Homeline is collateral.
    Lastly, I disagree that all lenders will move to collateral charges. Even if they did there is nothing the government could do about it. Rest assured, there will still be lenders that give customers a choice and they will have an advantage over the others.

     
  68. Comment avatar

    tcm1    

    I emailed the rep from TD but have not got any reply yet. It has been only one business day. He might think I ask too many questions and he will not make a sale so why bother replying.
    I am going to see another advisor at another branch to clarify the issue. My understanding is that since I am not getting a new mortgage but renewing an existing one I do not have to register it as a collateral. If that is not the case, good bye the green chair – you are getting a little too comfortable to be able to get out in the future.

     
  69. Comment avatar

    Alistair McLaughlin    

    Quick question Chris. You said most borrowers wish to increase borrowing when they renew? Does that mean most people are choosing to take on additional debt in the form of a HELOC when they renew roll over their mortgage? And if that is the case, is not TD and other banks somewhat concerned about the risks inherent in such a trend? Thanks.

     
  70. Comment avatar

    rachel    

    Most banks compound monthly on a variable because the rate fluctuates. It’s rather difficult to compound semi-annually on a fluctuating rates. Industry-standard I’d say

     
  71. Comment avatar

    rachel    

    Hi Lynn,
    My understanding is that legals are not required for a “straight switch” meaning exactly the same mortgage amount and terms. Often customers refinance or include penalties at switch, or set up a secured LOC at the same time.

     
  72. Comment avatar

    Ronnie    

    There are a lot of lenders that compound variable mortgages semi-annually.

     
  73. Comment avatar

    Peter    

    Takloo… Mortgages are posted as Semi-Annual rates by law so that consumers can compare them among different lenders. Mortgages are compounded monthly, bi-weekly or weekly if payments are monthly, every two weeks or weekly. It would be misleading if banks posted actual monthly rates as consumers will get the impression of lower rate.
    http://www.peterbarreto.ca
    Mortgage Broker

     
  74. Comment avatar

    Robbie    

    I found out to late about this collateral mortgage was never told by my TD bank at all! I watched cbc market place and checked my paper work there it was on the very bottom of my paper work what a butch of bottom feeders what does this mean to me now.can I sell my house at the end of my 5 year term and pay them off with out any fee,s and start again with another bank my house is worh around $400.000 only owe $120.000

     
  75. Comment avatar

    Invest    

    TD VP – great information. But the renewal issue with collateral loan has not been addressed. Will the bank still give the best rate to a client as they did when they first received the mortgage. Assuming all things are still the same (e.g., credit bureau, assets at the bank etc)
    The fear for most consumers is the inability to negotiate what you term “the biggest investment”, and in most cases the biggest expense.

     
  76. Comment avatar

    baboy525@hotmsil.com    

    Check out cibc s cash back for new clients
    Use this to pay Td’s off and get a good rate from
    them
    Shop around every few months

     
  77. Comment avatar

    Skye Cairns    

    How much are the fees the TD charges to transfer HELOC to another bank? Is there a need to go to a lawyer?

     
    1. Robert McLister    

      Hi Skye, You’d be looking at discharge fees from TD, assuming it’s a basic open HELOC. You’d typically have to cover the refinances charges to close your TD HELOC and open a new HELOC elsewhere, unless the new lender/broker was running a closing cost promotion. You may or may not have to see a lawyer, depending on whether the new lender has an in-house refinance program.

       
      Comment avatar

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