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Collateral Mortgages… a different 50 shades of grey!

handcuffs In 2010, TD announced they would begin registering ALL new mortgages as a collateral charge.  The sale pitch was that it was good for the consumer.  It would allow TD clients to borrow more, in the future, without having to incur new legal fees.  Yes, that part is true.

But they’ve left out a lot stuff, too!   For years, Mortgage Brokers and other unbiased financial professionals, cautioned the public about collateral mortgages.    And in 2013, CBC Marketplace did an expose on TD and their retail branch’s lack of knowledge and disclosure.   Is this where you want to go for your mortgage?TD

By the way, TD wasn’t the only Bank to go with collateral charge only.   ING made the same move in Dec 2011.  And they used a similar sales pitch.   But my readers have been hip to this and aren’t getting fooled.

The federal govt was pressured into taking action to protect consumers.  In Sept 2014, the federal govt announced ‘more disclosure.  But have the Banks really given us more disclosure?   Continue reading “Collateral Mortgages… a different 50 shades of grey!”

Scotiabank to buy ING….how will this affect you?

Earlier this month, ING Groep, the Dutch financial services giant, announced they were looking to sell their Canadian and UK operations in order to raise cash.   ING received a $10billion euro bailout from the Dutch govt during the 2008 Financial crisis and they want to start paying it back.

It didn’t take long to find a buyer for the Canadian operations.  Scotiabank will buy the Canadian division of ING for around $3billion.   The press release hinted at some good news for the Canadian public.  Scotiabank will continue to run ING as a separate entity.  For mortgage clients, this is mainly good news…. but we do have some concerns… Continue reading “Scotiabank to buy ING….how will this affect you?”

ING collateral mortgage began December 10, 2011..but no media coverage?

ING made it official and announced that all new mortgage applications submitted on or after December 10 2011, will be registered as a Collateral Charge.   Here’s a copy of the circular that was released….click here.

They join TD Canada Trust as just the second major lender to take this step and put the hand-cuffs on unsuspecting borrowers.   What’s different about ING’s move is that at renewal time, unlike TD, they will re-register a new collateral mortgage charge, at ING’s expense.    Strangely, I haven’t seen any major media coverage on this subject.  hmm, does this have anything to do with ING being the largest bank in the world??

SAY GOOD-BYE TO THE ‘UNMORTGAGE’ HELLO ‘MORTGAGE FOR LIFE’

But why should you care?  And what does it matter?  Well, this is about a few things.  CHOICE… they aren’t giving you one.  A collateral charge is normally used for loans and lines of credit.   There is no amortization.  And while that might be good for some, it’s not always good for all.  ING says you can refinance without having to incur new legal fees… yes, that’s true..however, you still have to be re-approved for any increase and negotiate your rate.   And the truth is, ING, just like all banks, doesn’t always have the lowest mortgage rates….don’t get fooled by their slick marketing ads…

FUTURE OPTIONS. It’s also about your future options… when it comes time to renew, and you want to switch your mortgage to another lender, you can’t… Collateral mortgages are NOT transferable.. you will have to deal with new legal fees… and ING knows this… so do you think they have to offer you the best rate at renewal time?

And speaking of the future, let’s look at a real possible scenario…suppose you need some money in a few years..   You have a great mortgage rate with ING.. it’s 3.64%… or it’s Variable Prime less 0.75%….  and now you don’t qualify for a mortgage increase.   With a conventional mortgage, you could always seek out a 2nd mortgage, but now you can’t… No 2nd mortgage lender will register behind a collateral charge.  You’re stuck with having to refinance the entire mortgage.   You lose, The Bank wins.

For me, ING and TD Canada Trust are not the first choice for mortgage lenders…

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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