How a Standard Charge Works
A standard charge mortgage is registered for the exact amount of your mortgage, and it is generally straightforward to transfer to another lender at renewal without needing to redo a full legal process, often at little or no cost.
How a Collateral Charge Works
A collateral charge can be registered for more than the actual mortgage amount, sometimes up to 100 percent or more of the property value, which can allow for future borrowing like a home equity line of credit without a new registration.
The Switching Trade-Off
The downside of a collateral charge is that it usually cannot simply be transferred to a new lender at renewal, requiring a full refinance with new legal fees. This can make it harder to shop around at the end of your term.
Why Some Lenders Use Collateral Charges
Lenders often use collateral charges because they make it easier to add products like a line of credit later without additional registration costs, which can be convenient if you plan to use that flexibility.
- Easier to add a line of credit later
- Can register for more than the loan amount
- Often used for readvanceable mortgages
Ask Before You Sign
Always ask your broker or lender whether your mortgage will be registered as a standard or collateral charge, so you know what to expect at renewal time.
Frequently asked questions
- Which type of charge is easier to switch lenders with?
- A standard charge is generally easier and cheaper to transfer to a new lender at renewal.
- Does a collateral charge cost more upfront?
- It can sometimes involve different legal costs at setup, though this varies by lender.
- Can I ask my lender which type of charge they use?
- Yes, and you should, since it is not always obvious from the mortgage documents alone.