Ask the Mortgage Expert

CONSUMER ALERT

COLLATERAL MORTGAGES

Banks have devised a plan to hold consumers hostage with a collateral mortgage. Here’s how it works, when

you get a mortgage from a bank they make the consumer agree to a collateral mortgage pledging their equity to the bank. Going forward if the consumer wants a second mortgage or to refinance their loan or even switch lenders at renewal; it will be all but impossible.

The promissory note that you are forced to sign is placed on your property as a lien and gives the bank security up to 125% of the value of the property regardless of the mortgage size. If you own a $300,000 home and owe $150,000 you might think that you have equity of $150,000 to do with as you please. Not so. The bank has registered a $375,000 charge on your $300,000 home. This does not mean that the borrower has access to those funds it just means the bank controls you. The bank offers the offensive position that the consumer may be able borrow more money in the future with no additional legal costs. Of course there is no guarantee of that and it’s a ludicrous argument in any event. It’s simply designed to hold the consumer hostage.

Clearly the motive here is to control the consumer and restrict freedom of choice. Royal Bank is leading the way, TD, Scotia, CIBC are following along with the others.

Beware of collateral mortgages and a clause called a re-advance clause. If you agree to either you’ll be giving up any chance of freedom to chose in the event of a financial emergency. The banks are not as warm and fuzzy as they position themselves on television.

Mortgage brokers only have 30% of the market in Canada but we keep the banks in line. We approve deals the banks will not approve and we offer rates that banks hate to offer. Banks have posted rates and discounted rates. If brokers didn’t exist consumers would pay posted rates at the bank. Brokers have in-depth knowledge that bank employees lack, we’re licensed, have the best rates in the industry, and have access to so many products and lenders. Brokers are here to protect you and guide you.

Sincerely,

Kymberly Izzard

Mortgage Broker

Prepare To Be Amazed.