Are you a prospective homebuyer, pondering mortgage charge differences? We’re here to unravel the complexities of standard and collateral charge mortgages.
Standard Charge Mortgage: The Basics
A standard charge mortgage is your traditional mortgage. The amount you borrow is registered against the title to safeguard the lender in case of default. Upon the end of your mortgage term, you can renew your existing mortgage or switch to another lender, often with cost coverage if the terms remain unchanged.
However, a standard charge mortgage is non-advanceable. If you need more funds, reapplying and requalifying for a new mortgage will be necessary, incurring costs for breaking and registering.
Collateral Charge Mortgage: Flexibility and Complexity
A collateral charge mortgage offers multiple components, often including a re-advanceable part, accommodating various financing options such as personal loans or lines of credit. Your mortgage is registered for future borrowing, making it convenient.
One example is the home equity line of credit.
Unlike standard charge mortgages, lenders register a higher amount than your actual borrowings. This registration can extend up to 125% of your property’s value. If your property appreciates, you can access additional funds without rewriting your existing mortgage, saving on costs.
However, switching lenders at the term’s end might require discharging the mortgage, incurring legal fees. Additionally, it might limit your ability to secure a second mortgage.
Choosing the Right Fit
Selecting between the two depends on your financial situation and flexibility needs. An independent mortgage professional can guide you, assessing your needs, and offering options. Avoid being tied to a single lender that may limit your choices.
If you’re still unsure about which mortgage type suits you best, remember that making an informed decision can save you time and money in the long run. Don’t hesitate to seek advice from a mortgage expert who can provide personalized recommendations based on your unique circumstances and goals.
Contributed by Sabeena Bubber – reach out to Sabeena for more info here.
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