Introducing the new TD mortgage…hand-cuffs included

The rumors are true…TD Canada Trust will begin registering all mortgages as collateral charges after October 18.    (No official release from TD yet but a source inside TD has confirmed this to us).

What does this mean for the consumer?  Well, there is some good but mainly it’s bad..

  • a collateral mortgage is normally registered for floating or revolving debt such as a secured line of credit.  It allows for the balance to float up or down.
  • TD will register a collateral charge for 125% of the loan amount… this will allow the client to come back at a later date and apply to increase their mortgage if needed….
  • in theory, it sounds great…no legal fees required in the future if you need to refinance… and easy approval…

BUT HOLD ON…

  • a COLLATERAL MORTGAGE is NOT really portable…meaning you cannot transfer to another institution…that’s because no other Bank or Lender is accepting collateral mortgages for transfer… including TD…you will lose some leverage to negotiate the rate when your mortgage matures…
  • and if you wanted to increase your mortgage in the future, you would need to reapply for approval…let’s suppose you don’t qualify in the future..not because your situation changed but because the Bank’s lending policy changes…this happens regularly….you would now have to seek out an entirely  new 1st mortgage as no other lender would register a 2nd mortgage in behind a collateral first mortgage (at least none that I am aware of)…  that could mean penalties, definitely legal fees and other costs….
  • It’s obvious that a big reason TD would be doing this is to improve mortgage retention.. this makes it less appealing to leave TD because of the costs….
  • BOTTOM LINE…this type of mortgage limits your options..it doesn’t expand them.. you MAY save on legal fees..but that’s not a big enough reason to go with this product..

My advise to anyone looking at a TD mortgage is to be careful…make sure you understand all the terms, conditions, the differences and the limitations…you be the judge… is this a good thing for the client or is it a good thing for the Bank??  Will other Banks follow?  Some might say this is like putting handcuffs on the client… I tend to agree…

14 Responses to “Introducing the new TD mortgage…hand-cuffs included”

  1. Mike Says:

    It is portable

    • SG Says:

      Hi Mike, thanks for the input…I don’t know of any collateral mortgage that is portable…? TD may port the existing terms to another property but a new mortgage would have to be registered…. I don’t think my point was well worded… what i meant to point out is that this new TD collateral mortgage cannot be moved to another financial institution…. it would have to be discharged and a new mortgage registered……

      This is where the client loses their leverage….

  2. Looking for your reponses | Ellen Roseman Says:

    […] Garganis, a mortgage broker, told me about his blog post that TD is planning to start registering all mortgages as collateral charges on Oct. 18. He calls […]

  3. Looking for your reponses | Credit Debt Banking News | CDBN Says:

    […] to make it harder for customers to switch. Steve Garganis, a mortgage broker, told me about his blog post that TD is planning to start registering all mortgages as collateral charges on Oct. 18. He calls […]

  4. rocco Says:

    TD today, BMO etc etc tomorrow.

    • SG Says:

      Yes, we could see other banks follow…but then again, maybe not… i think it will be interesting to see how the public and media reacts..

      I’m starting to wonder if this has anything to do with the Standardization of prepayment penalties that the Federal Govt announced in February.. we still haven’t seen any policy changes…. could this be a loophole to make it harder for borrowers to get out of one Bank?

  5. roclafamilia Says:

    Helpful blog, bookmarked the website with hopes to read more!

  6. SG Says:

    Hi Michelle,

    To qualify for a mortgage, you need a few things… you need a minimum down payment of 5% of the purchase price, a good credit history and satisfactory income and employment. I suggest you complete a mortgage to see what you would qualify for… I’d be happy to take a look at your financing profile… please visit http://www.Needamortgage.ca and click on ‘Apply Now’… fill in the details and I will get back to you within a few days…

    Steve

  7. Joyce Varley Says:

    I wish to port my mortgage to another property, to be near family. I have retired, since getting the mortgage, 1 and 1/2 yrs ago. The mortgage is supposed to be portable, (not changing the amount, and am buying a similar priced house) However, they now say I must re-qualify, and since my income is less, I do not qualify.
    This is very upsetting, as my only choice would be to stay where I am….they said, to renew, I need not re-qualify.
    This I feel is discrimination against seniors, and retirees, as many will want to move, and may not now qualify, but are not allowed to port. This is not the case at all banks, but I am stuck at TDCanadaTrust……Not happy!

    • SG Says:

      Hi Joyce,

      Yes, this is terrible.. and I have seen this happen before.. Unfortunately, most all lenders will want and need to qualify you again, when you change properties.. however, I will make a suggestion.. please contact me by email or phone, and I will take a closer look at your situation… I may be able to recommend some options…

      416 224 0114 or email is steve@mortgagenow.ca

      Steve

    • Tyson Says:

      Hi Joyce,

      It’s been roughly 10 months since your initial post, and I’m wondering how you made out?

      I’m in a similar situation, where I’d like to sell and port to a different home with the new buying price approximately equals the reminder of my existing mortgage. I would be making a nice gain on selling and the new property is out of the city. Peaceful.

      The catch is I would also need to re-qualify with TD. Unfortunately there have been changes in my work experience that might hinder the process. Though, this entire process doesn’t feel right – it feels more like a cash grab. Seeing as both properties require the same sized mortgage, a simple swap would seem the most logical.

      Also, it’s not just a problem for seniors…I’m 29!

      I look forward to your reply! 🙂

      • Steve Garganis Says:

        Hi Tyson,

        Feel free to contact me about qualifying with TD.. It’s worth taking a look.. maybe there is something we can do…

        Steve

      • Joyce Varley Says:

        Hi Tyson,
        I did not end up moving……it was going to be very difficult, TD would not port my mort, as I had retired, and made less income. The house I was trying to buy, although less than mine was worth, was going to cost me a lot more, because of higher interest charges, and a 1st And 2nd mort. (had to go through a Mort broker, with lots of fees attached).
        Needless to say, I am not very happy with this outcome…..if I ever want to move from here, I will have to find more money somewhere. Not fair? No, of course not….I have made all my payments on time, and the new place should have cost about the same, so no problem to carry it. But, they apparently don’t care about people, only their little rule book. Yes, they advertise making banking comfortable, with the big green chair (and, have the nerve to use seniors in the ad). Well, people in these situations better get comfortable….cause they ain’t goin nowhere.
        Sorry I could not give you good news….hope you fare better Tyson.

        Best,

        Joyce


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