Why Collateral Mortgages are NOT Cute and Cuddly / Mortgage Contracts / Mortgage Lien / HIGH FEES

well hello there my name is Mark Albert
and this is my good friend Bucky. Bucky is a dwarf rabbit in fact, it’s my
daughter’s rabbit. Before I go any further, a shout-out to Karen there
because Karen is a friend of mine who loves rabbits like no one else in the
world loves rabbits. So rabbits are awesome and the reason Bucky is with us today is
because if you take a look at Bucky. Bucky is soft and cute and cuddly and
and we’re gonna talk about collateral mortgages and in my opinion collateral
mortgages are not cute and cuddly. But Bucky is. So there’s a difference. This cute and cuddly
gives you the warmth exciting feeling. In fact, my daughter be cuddling with
Bucky for extended periods of time but the collateral mortgage is not cute
cuddly. If you’re familiar with the Penguins of Madagascar those guys are
cute and cuddly but the collateral mortgage is not cute and cuddly. I’ll explain
that a little bit here we’re gonna give Bucky a little bit more lettuce come on
over see your letters get off my paper there you go good Bucky. So I got here
from the government website from budget 2014 from the federal government in it I
went to the section called “supporting families and communities” and actually at
this time that’s these are the government archives so I was able to find that
Bucky is very excited to know about collateral mortgages so they said here
in terms of raising financial consumer awareness so raising financial consumer
awareness they said “the government will continue to raise public awareness about
the cost of and alternatives to payday lending and other high interest rate
lending products collateral charge mortgages and Bank powers of attorney
and joint accounts” so you know I find interesting here is that when the
government the fair guy was talking about consumer financial awareness to
make the consumers aware of something in the very same sentence that they’re
putting payday lending and other high interest rate lending products they
throw in there this collateral mortgage which is called a
collateral charge mortgage. so what is that all Bobby should it be concerning
to us they would have to say while many consumers continue to choose a
traditional mortgage to secure their home loans many are increasingly
choosing collateral charge mortgages and I think the reason is is because some of
the lenders some of the banks and credit unions for them it’s a lot more
profitable of a product and so they’re offering that product instead of many
alternatives like the traditional mortgage that conventional mortgage that
we would be used to and so there’s a growing number of people who have these
mortgages and the government felt it important enough to add it in their
budget in 2014 because of the concern they had so I went also on the archive
to government Canada and there’s something I found here it’s called
voluntary commitments by banks on collateral
charge mortgages and in there in the government’s action plan the economic
action plan they called on banks to enhance disclosure to consumers of the
costs and consequences of collateral charge mortgages related to conventional
mortgages better-equipped borrowers and understand the impact of them and so I
just want to explain a little bit about what what it is here so if we have here
you go thanks Bucky so we got numbers here so let’s say someone buys a house
and the appraised value of the house is $500,000 and let’s say the mortgage that
they need is $200,000 because they have enough equity or they have enough to put
down on the house so traditionally what the bank or lender would do is they
would put they would register a lien against the house for $200,000 because
it’s a secured loan this mortgage but what the collateral mortgage does is
they will register a higher amount so let’s say
this is registered on the collateral they register a higher amount so let’s
say 400,000 so all of this between 400 and 200 they’re just holding a lien on
the house so that equity is not available for anything else but they
tell you that there’s flexibility so that if you need more money
beyond this mortgage we can give you a line of credit or some other thing for a
higher amount and so one of the challenges comes here is when a customer
someone came to me and they had this product and they didn’t know they had a
collateral mortgage and then went back to their bank who was holding a lien
against their house for a higher amount and they said you don’t qualify for any
more credit because of the stress test they were in a difficult situation and
so that person came to me and being that a part of a brokerage I was able to get
him a second mortgage typically but because that the bank they were with was
holding the lien against the house registered all of that equity there was
no room in the equity of the home to help this client with a solution a
simple solution it would have helped them in a tight situation so that’s one
disadvantage for that particular client so the collateral mortgage they can
actually register up to a hundred and twenty five percent of the value of the
home so they could actually register in this safe case they could register much
higher amount and the reason they would do that and they don’t always do that
but the reason they would is so as the value of your home goes up then if you
need additional a mortgage or line of credit type product instead of
refinancing you can just go through them and
like that so so that’s that so going back to the Government of Canada they
they’re very very very aware that this is a consumer product that the consumer
is not very educated on that those mortgage professionals that are signed
on these products aren’t fully transparent in terms of what the product
is all about on the positive and negative side and so they say here is
the consumers require sufficient information in order to more clearly
understand the costs and consequences of a collateral
charge of mortgage related to the conventional mortgage and so the
government Canada said here they said when banks offer residential mortgages
they will provide consumers is what they’re supposed to do they will provide
consumers with comparative information that will help them understand the
difference between the collateral charge mortgage and the conventional mortgage
so an educational piece that shows the pros and the cons of the two is what
they require them to do and this goes back to 2014 and it says here banks are
to commit to providing both general and specific information in a manner is
right like that is clear simple and not misleading but the problem the challenge
I see is I’ve had a number of people come to me and they have this product
already and they’re in a bit of a pickle and they need help but just very little
we can do to help them because they’re they’re very much locked in and tied
into this product right here so in terms of the negatives on this product and I
think I would say to you if you’re working with the mortgage professional
ask a lot of good questions ask a lot of good questions in terms of of the equity
in your home in terms of how much is going to be registered against the house
what’s the lien side is going to be and and that’s an issue because if your
equity is all tied up then to other creditors it may appear
that you’re overextended from a debt perspective and it may be difficult to
get other type of financing and in a mortgage situation via second mortgage
very difficult so the way they register this collateral charge is done
differently than the traditional mortgages it’s done in a way that you
really can’t transfer from this lender to another lender so at the end of your
term let’s say you’re in a five-year term at the end of that term you cannot
transfer so you basically there’s a lot of high fees to cancel that so it’s the
end of your term there may be a lot of high fees we’re talking thousands of
dollars to cancel that mortgage to get out of it
and people don’t like that and also so on the transfer makes it very difficult
so it’s difficult because of the type of charge that’s registered against your
house and it requires a lawyer to take that off which is very expensive in this
situation it so becomes very difficult to transfer so people get very very
frustrated in that whole experience to transfer so there’s some of the natives
so I would just say if you’re working with and there’s a product that you want
because you want to have that ability and that flexibility that’s fine but ask
good questions and make sure all your questions get answered the best thing is
to write down questions before your appointment and things like that so
listen I really appreciate your time and if you like this type of a video
subscribe below and don’t forget to like the video thank you very much and Bucky
I appreciate your help – you’ve been fantastic already by now

3 comments on “Why Collateral Mortgages are NOT Cute and Cuddly / Mortgage Contracts / Mortgage Lien / HIGH FEES”

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