When you need a residential mortgage to buy a home, lenders (such as CIBC) require security for repayment in the form of property, such as a house.
You need to sign a charge document, which is registered in the provincial or territorial land registry office where the property is located. The charge gives the lender certain rights, including the right to sell the property if you don't repay your loan as agreed.
There are 2 types of charges a lender can register: standard or collateral. A standard charge is also referred to as a traditional, conventional or non-collateral charge.
What's a standard charge?
A standard charge is a traditional or conventional charge. It's registered on titleOpens a popup. in a document that includes the details of your mortgage loan, such as the principal amount, interest rate, term, payment amount and more. A standard charge is registered for the actual amount of the mortgage loan, securing only the one mortgage loan.
For example, if you need a mortgage loan for $300,000 to buy a home and the loan is secured by a standard charge, the lender registers a standard charge for $300,000. If you want to borrow more, you need to pay off the mortgage loan, discharge the registered charge, sign a new mortgage loan agreement and register a new charge on title.
What's a collateral charge?
A collateral charge is also called a collateral mortgage. It lets you use your home as security for one or more loans. Because the lender may register the charge for an amount that's more than your initial loan, you may be able to borrow more money without registering a new charge, if the total amount owing is no more than the principal amount of the collateral charge.
For example, if you need a mortgage loan for $300,000 to buy a home, the lender may register a collateral charge for $350,000, and you may be able to borrow an additional $50,000 in the future without registering a new charge. The mortgage loan details (such as the principal amount, interest rate, term and payment amount) are in a separate document (the mortgage loan agreement). They're not included in the document registered on title.
Standard charges versus collateral charges
What are some of the benefits?
Standard charges: Most lenders will accept a transfer or assignment of another lender’s standard charge. This means you can switch lenders without discharging the existing charge from title and registering a new one.
Collateral charges: With a collateral charge, you may be able to borrow more funds against your property in the future without registering a new charge. This helps you avoid legal and other fees, because the collateral charge may be registered for more than the amount of the original mortgage.
How much does CIBC register the charge for?
Standard charges: CIBC registers the standard charge for the actual amount you borrow. For example, if you buy a home for $500,000, and need a mortgage loan for $250,000, the standard charge is registered for the actual amount of the mortgage loan ($250,000).
Collateral charges: CIBC may register the collateral charge for up to or more than the full property value, so you can borrow more money in the future. The registered amount is based on your preference and your current and future financial plans.
For the CIBC Home Power Plan®, CIBC typically registers the charge for up to 100% of the property value. For example, CIBC could register the charge for 100% (or more) of the value of the home when you borrow 80% of the home’s value. But, you only make payments and pay interest on the borrowed amount. There's a separate loan agreement that contains the loan amount, interest rate, term and other mortgage details. On real estate secured loans and lines of credit, CIBC typically registers the collateral charge for the amount of the loan or line of credit you're approved for.
What do I pay if I switch lenders?
Standard charges: You can switch your existing mortgage to another lender at the end of the term without increasing the amount. The mortgage loan and registered standard charge can be transferred or assigned to another lender, if the other lender agrees.
You may pay a prepayment charge on a mortgage that's transferred or paid out before the maturity dateOpens a popup..
Collateral charges: If you want to switch your existing mortgage to another lender at the end of the term, the new lender may not accept a transfer of your registered collateral charge. In that case, you pay fees to discharge your registered collateral charge and register a new charge with the new lender. If the collateral charge also secures other debts to your original lender, you repay those debts before the lender transfers or assigns the charge to your new lender or discharges it from title.
You may pay a prepayment charge on a mortgage that's transferred or paid out before the maturity date.
How do I borrow more money?
Standard charges: If you have a standard charge and want to borrow more money against your property, you pay fees to discharge your existing standard charge and register a new charge for a higher amount.
You may pay a prepayment charge on a mortgage that's transferred or paid out before the maturity date.
Collateral charges: If you have a collateral charge, you may be able to borrow more money without registering a new charge and paying legal and other fees. You need to qualify for the additional funds and the collateral charge needs to have been registered for a sufficiently high amount.
You may pay prepayment charges on a mortgage that's transferred or paid out before the maturity date.
How do I discharge my registered mortgage charge?
Standard charges: If you have a standard charge and pay off your mortgage in full, CIBC will release its interest in your property and register a discharge of the mortgage. There may be costs associated with registering the discharge and, depending on the region, a discharge fee may apply.
Collateral charges: If you have a collateral charge, your charge may remain in place even when you pay off the amortizing component of the mortgage loan and any other funds you borrowed (such as revolving credit). You may be able to borrow more funds against your property in the future without registering a new charge. This helps you avoid legal and other fees.
If you don’t think you’ll need to borrow money in the future and have repaid all credit secured by the charge, just ask to discharge the charge. There may be costs associated with registering the discharge and, depending on the region, a discharge fee may apply.
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