ING collateral charge in 2012.. hand-cuffs included
You’ve seen the ads… That fellow with the Dutch accent and the orange background, telling us to ‘save your money’. Since 1997, when they first entered Canada, they have grown to 1.7 million clients and $37billion in assets. ING spends millions in marketing… They’ve created a brand that is synonymous with saving or discounts.
Today, I just heard they will be counting on that trust. It is rumoured ING Direct will begin registering ALL mortgages as collateral charges. They join TD Bank as the second major lender to make this bold change. A move that has great implications for the Canadian consumer.
It was almost one year ago when TD Bank announced they would register all their mortgages as a collateral charge. (click here for the details of what a collateral mortgage is and some reactions). Consumer advocates spoke up and warned against getting a mortgage like this…. Strangely, the media was silent. (hmm, I wonder how much TD spends in media advertising???).
In short, the benefit is that you will be able to increase your mortgage without having to spend money on new legal fees….ok, that saves you around $800 to $1,000. That’s your benefit. (but even this has changed as there are some programs that will offer a discounted legal fee).
Here’s what you lose….you give up your leverage to negotiate the best rate… and that’s because if you want to leave ING, you cannot simply transfer your mortgage… Collateral mortgages cannot be transferred. You still have to qualify for any increase… you must trust that the Bank has your best interest at heart…. Hey, remember when all the banks raised their lines of credit rates in 2008-09 without warning?
ING has been a great Lender, but this new move will drive away most advisors, mortgage brokers and clients that want options and flexibility..
I’ll continue to report more as this story breaks..
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Steve Garganis View All
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.
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Thanks for posting this. That’s pretty weak of one of Canada’s most “honest” lenders to go this route. Sign of things to come I guess.
Hi Jake,
Yes, it’s a real surprise… But there are plenty of other lenders that have not followed suit… and my guess is that they won’t… we could see some other major banks follow but this would only push borrowers to go elsewhere… with internet and social media sites, it’s not too hard to find good alternatives…
Steve
Steve,
What happens to clients with existing mortgages with ING? Do they automatically get converted, or is this only for new mortgages?
Hi Brian,
Great question and one that I will be answering in greater detail in another article.. but here’s the answer..
All new ING mortgages will be registered as collateral charges… If you are an existing ING client, your mortgage will be converted to a collateral charge at renewal time… So BEWARE existing ING clients… I’d think very had about shopping your mortgage at renewal time…
Steve
I appreciate the information you’re providing on collateral mortgages, Steve. Thank you. While doing some research on this, I found an article:
http://www.cbc.ca/marketplace/episodes/2013/01/decoding-mortgages.html
where Farhaneh Haque, Director, Mortgage Advice for TD Canada Trust, where she says “All conventional and collateral charges are transferable in most Provinces.” I perhaps do not agree that collateral mortgages should be entered into lightly (I’m doing what I can to stay away from them), they may be a solution for those that are aware of their implications.
Hi DT,
I am very familiar with that cbc marketplace episode.. I was contacted by the CBC Marketplace producers for my advice and opinions during the filming of that episode… Here is an article I wrote about it http://bit.ly/14vNuup
Farhaneh is giving an incomplete answer and I find her comments misleading… I do not know of any Bank or Financial Institution that will accept a collateral mortgage for transfer… Heck, even TD Canada Trust won’t accept collateral mortgages for transfer!!! So he comments are very, very misleading in my opinion…
Collateral mortgages are fine for borrowers that know what they are getting into… but most borrowers have no idea what the implications are… If you want a more detailed review, I’d be happy to speak with you… drop me a line or call me at 416 224 0114
I read your other article as well, Steve. Thank you for everything you’ve written on the topic. I just couldn’t find anything here on Farhaney explicitly saying that collateral mortgages can be transferred in most provinces.
The TD recently offered to renegotiate my current variable-rate to a fixed-rate. I was given links to various articles on the TD now only offering collateral mortgages, and I’m very glad I found additional articles like yours that explain the difference. I have no intention of going into a collateral mortgage, and will verify with the TD – in writing – that this offer will not “convert” my existing conventional to a collateral mortgage.
I don’t think they will covert you into a collateral but you should make sure of this… I’m curious, why are you locking into a fixed rate? what is your current variable rate? when does it mature? what term and rate are you being offered for your fixed rate? Are you relying on TD to do your shopping? If so, that’s like asking Harvey’s restaurant who makes the best burger? If want to shop the market, send the answers to the above and I will give you my opinion, if you like..
My current variable is at 3.8% with about 14 months remaining, and they’ve offered me 2.69% fixed for 2 years, with no penalty, and I can maintain my current payments. (This represents a significant savings over two years.)
I do have a broker who has suggested that she can get me 2.39% for a 2-year fixed, and I will certainly negotiate with the TD before accepting their offer.
My situation presents some difficulties if I want to move to a different lender, so I am providing the TD with the opportunity to retain my business for a little while longer.
Also, thank you for suggesting that the TD may not convert my mortgage to a collateral type.
Here’s a great example of getting taken advantage of.. I’m sorry DT… but why would you be in a variable rate at prime plus 0.80%??? and why for almost 4 yrs?? Do you realize how much this has cost you?? First of all, had you been one of my clients 4 yrs ago, you would not hear me recommending Variable rate products at that time because of the high pricing… was recommending shorter term products.. it’s well documented in my archived newsletters.. Next, why wouldn’t you get out of TD’s variable rate 2 or 2 and half yrs ago and into a better priced Variable rate at Prime LESS 0.75%…?? That’s right.. we had access to Prime less 0.75% with a great lender in 2010…
You would be paying 2.25% in stead of 3.80% for the last 2 yrs…. you would have saved yourself 1.55% per year… That’s $3100 per year on a $200,000 mortgage.!!
I’m sorry to point this out to you.. but you need to adjust your focus… you are looking at getting into a 2 yr fixed at 2.69% or lower for 2 yrs… but you missed what TD has been charging you over the past 4 yrs….
My advice is to get out of TD.. break away.. Why get into their fixed rate mortgage and then have to deal with their fixed rate terms…? I don’t understand why your are looking at a 2 yr term…? My advice it look at a longer term product… there just isn’t enough difference between 2, 3, 4 and 5 yr terms…. and with 5 yr terms at record low levels, it makes more send to choose a 5 yr term… there are good 5 yr fixed rate products at 2.89%… that’s where I’d be looking…
I hate seeing anyone paying more than they have to… Hope you look more long term… i hope you find this useful..