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TD's-Collateral-Charge-Mortgage On Friday, TD further explained the logic behind its controversial across-the-board switch to collateral charge mortgages.

TD says it instituted collateral charges on its entire product line, in part, because “20 times” more customers refinance with TD than switch their mortgage using an assignment.

Moreover, the bank says collateral charges let customers refinance at TD, or change among TD products, without incurring legal fees.

“20 times” is a big ratio. However, compared to the average lender, TD has a disproportionate number of customers in collateral charges already. That’s relevant because lenders don’t accept TD’s collateral mortgages in assignment. Therefore, by default, there won’t be as many assignments coming from TD compared to lenders who register a larger proportion of “standard charges.”

In any case, TD’s internal refi-to-switch ratio is meaningless to those homeowners who want a regular low-cost mortgage and don’t intend to refinance.

All of this boils down to customer choice.  TD doesn’t allow the option of choosing between a standard or collateral charge (its mortgages are all collateral now), so you need to think ahead:

  • If your situation is such that:
    • You want a secured line of credit with your mortgage or you think there’s a high probability you’ll refinance during your term; or,
    • TD gives you the best overall deal (e.g. one that is at least $700-800 better than the next best option)…

…then TD may be a perfectly reasonable fit.

  • If instead, you:
    1. Won’t need to refinance during your term
    2. Don’t need a secured line of credit
    3. Like to shop around for the best deal
    4. Don’t want to pay legal fees if you switch lenders at maturity; and,
    5. Can get the same mortgage deal elsewhere…

…then TD is probably not the best choice for your mortgage.

As usual, there are always exceptions so speak with a mortgage professional for guidance specific to your circumstances.

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