The Rudiments of Mortgage Registration

You have finally made the decision to purchase your dream house. Fantastic! You planned` well your finances and made sure that your credit score is up to par with your lender’s requirements. You likewise sought the advice of a professional mortgage broker and landed an excellent deal on your new property. You and your family can now enjoy your hard-earned home in peace and in tranquility.

But did you know that your mortgage – just like your residence – needs to be registered, too?

Make no mistake! Your mortgage has to be registered to be fully useful not only to you but also to your lender. A registered loan agreement connotes that (1) the contract is legally binding between two (or more) individuals; (2) the borrower is protected from unlawful foreclosure (or lender usurpation); and, (3) lender is protected from borrower default (or non-payment) leading to loss of income and investment.

In this blog, we are going to briefly discuss about mortgage registration and how this impacts both the lender and the borrower. We will also provide an example to help you better understand this “hybrid topic” – a topic that possesses both theoretical and legal aspects.

Let’s begin…

Mortgage Registration Defined

Mortgage registration is a process where the lender lists or catalogues your mortgage agreement – the loanable amount – within the area where your house is located and is made or drawn against your property.

You can also consider a registered mortgage as your lender’s collateral held against your residence: if you fail to pay your monthly amortization on time or you frequently default on your payments due to lack of funds then your lender, by law, can and will foreclose your property and even have it sold to recover his/her losses.

When this happens, you can either be blacklisted and, therefore, can no longer apply for any mortgage loan or be denied application for a bad credit mortgage approval. You will be automatically considered as a high risk borrower and gaining your lender’s trust will be almost impossible if not improbable.

Kinds of Mortgage Registration

Just like any topic we dealt with in the past, mortgage registration also comes with its own variety: standard charge and collateral charge. We will tackle these two kinds concisely below:

a. Standard Charge Mortgage – this means your lender registers your home
through the registry office in your chosen municipality. In other words, you
can have your mortgage registered, discharged, or transferred via your lender.

(NOTE: When your mortgage agreement is up for renewal, you can either
renew with your current lender or change lenders without incurring any
legal penalties. These penalties can range between $600.00 and $1000.00.)
Pros and Cons of Standard Charge Mortgage

PROS:

  1. Flexibility at renewal period
  2. Lender switching is an allowable feature
  3. Interest rate negotiation
  4. Optional best product choices
  5. No legal fees involved for lender switching
  6. Second mortgage granting is possible

CONS:

Sample Situation for SCM

SCM – also known as straightforward mortgage – is better understood by the example below:

Amount borrowed (mortgage value/loan amount) thru SCM = $240,000.00
Actual house cost = $300,000.00

  1. Re-qualification needed to borrow additional money against your house
  2. Legal fees required (i.e. refinancing purposes)

The lender will only register the mortgage for the loan amount granted ($240,000.00) and not for the house cost ($300,000.00). The difference of $60,000.00 is not included because this amount represents the value of your NON-BORROWED down payment.

This type is highly attractive to first-time house buyers from reputable mortgage loan private lenders whose aim is to help them cope with their initial mortgage loan.

(NOTE: If you wish to borrow money – a 2nd mortgage, for instance – that is more than $240,000.00 then you will have to enter into another agreement with your lender.)

b. Collateral Charge Mortgage – this refers to your readvanceable mortgage
amount in which your lender can extend more money as your property value
increases without necessitating mortgage refinancing.

Pros and Cons of Collateral Charge Mortgage

PROS:

  1. Flexibility to borrow money from your property in the future
  2. Avoidance of legal fees when refinancing

CONS:

  1. You appear to be a risk (amount appears to be bigger than the actual loan)
  2. Lender may or can use your collateral mortgage as payment for other outstanding obligations
  3. Legal fees are required if you opt to switch lenders since this type does not accept switching or changing of lender/s.

Sample Situation for CCM

Amount of house = $300,000.00
Actual loan needed = $225,000.00
Loan granted per CCM = $375,000.00

The lender will have registered your mortgage – under the collateral charge mortgage – for $375,000.00 instead and not for $225,000.00. The difference – $150,000.00 – is your additional funds that you can borrow WITHOUT incurring any legal fees most especially during refinancing.

This second type is risky all throughout because you might end up with bad credit home mortgage lenders questioning your capability to manage your funds properly should you decide to borrow from them.

(NOTE: Clearly SCM is better than CCM since the loan from the former is more manageable compared to the loan from the latter.)

Final Thoughts

Mortgage registration is a necessity to protect both the lender and the borrower from instances that can and/or will compromise the relationship between the two parties. There are two types of mortgage registries: standard charge mortgage and collateral charge mortgage.

Standard charge mortgage is straightforward or fixed while collateral charge mortgage is variable or adjustable depending on the lender registering the mortgage contract. You save time and effort in having your lender handle the registry process because the latter shoulders the expenses incurred.

Make sure to study your options regarding what type of mortgage to have your lender register your loan to avoid complications in the future.


We are your Oshawa experts in mortgage advisory services and in credit score restructuring for 9 years running. Our satellite offices are spread across Canada and we offer financial restructuring as well as credit assistance to many of our clients.
Contact us at (416) 825 0142 or send an email to [email protected] today for more information.

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