Much has been said about this new mortgage offered by TD Bank and yes, this concept has been available in other institutions in the past and presently.
We are all familiar with conventional mortgages; we know that with this choice we establish the amount, interest rate and amortization period. We know that if we follow a plan and keep on track, our property will be paid off at the end of this amortization.
A collateral mortgage is a loan attached to a promissory note and backed up by the collateral security of a mortgage on a property. Typically a collateral mortgage is registered as a secure line of credit, allowing the balance of the loan to float up or down depending on the customer's use.
The primary benefit of a collateral mortgage is that this promissory note goes with a lien on the property of the total amount registered and up to 125% of the property value. The client will have to qualify and may use this benefit as he/she chooses.
Having said that, PLEASE heed this red light warning:
The collateral mortgage allows "re-advancing" of principal: like a revolving line of credit. The balance can rise and very often does, with most people ignorant about the holes they are digging for themselves. Most chartered banks will not accept "transfers" of collateral mortgages especially once they are inflated with other credit cards, car loans and other lines of credit that you may have with TD Bank. There are conditions involved such as the inability to switch on renewal.
I have been a costumer of TD Bank for years and still am - no longer with my mortgage but with my daily transactions and savings plans. As a Realtor I have recommended this institution hundreds of times.
This new type of mortgage may be for you. If so, please read the fine print on the the contract or, better yet, have your solicitor do it on your behalf.
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