Have you ever heard of Collateral Mortgages?
A collateral mortgage is a type of mortgage that will give you more funds than a conventional mortgage. It allows you to secure a mortgage against your property. It's like a Home Equity Line of Credit (HELOC), you can borrow more money, without having to refinance.
When applying for a mortgage, we’re familiar with asking about the term, amortization, interest rate, and monthly payments. There’s another aspect to be aware of. Some Mortgage Lenders are now asking Borrowers to sign Collateral Mortgages — and it could result in a Borrower being tied to that Lender for longer than anticipated.
The downsides of a Collateral Mortgage can be summed-up as:
- It may take away a Borrower’s leverage in terms of being able to easily transfer the mortgage, at renewal, to another Lender for a better rate.
- If you want to pay off your mortgage as fast as possible, this type of mortgage may not be your best option as it could adds extra debts that you may not necessarely need..
- A Lender may use the Collateral Mortgage to offset unpaid debts other than the mortgage.
- With a Collateral Mortgage, if in arrears or default, the Lender could raise the interest rate as penalty.
If you need any help, let me know, I work with a lot of great lenders that can help you find the best product for your needs.