Definition
A collateral mortgage charge is a legal structure used primarily by TD Bank in Canada, in which the mortgage is registered for an amount up to 125% of the property value, rather than the actual loan amount.
Theoretical advantages for the borrower: - Ability to borrow more in the future without new registration fees (internal administrative refinancing) - Flexibility to link multiple credit products (line of credit, personal loan)
Major disadvantages: - **Non-transferable**: unlike a conventional mortgage, a collateral mortgage cannot simply be 'transferred' to another lender at renewal. The borrower must pay discharge fees ($300-$800) + notarial fees if they change lenders. - **No free switch**: competitors' 'free transfer' offers do not apply. This lock-in reduces the client's negotiating power. - **Impact on refinancing**: registration at 125% can complicate setting up a second mortgage or line with another institution.
In Quebec, TD Bank registers its mortgages as universal hypothecs, which has the same lock-in effect.