Beware of Collateral Mortgages – Watch what is in the fine print!Most consumers know their mortgage rate, term, amortization and mortgagepayment. Most would not know if their mortgage is a conventional orcollateral mortgage, as this is buried in the fine print.A collateral mortgage registered on your home is usually for a larger amountthan you asked for. It can be an amount 100% or 125% of the house value.This allows you to borrow, at a later date, the extra funds based on thebank’s current lending criteria, your ability to repay the mortgage. Thebanker will tell you that this will save you money and it is for your benefit; itis what they don’t tell you that you need to be aware of.Beware of What The Banker Does Not Tell You!They won’t tell you that you cannot transfer your mortgage to anotherlender on the maturity date for FREE. You could pay the mortgage atmaturity from another lender but it would likely cost you close to $1,000.00.This means you are married to the bank regardless of what theirrenewal rate is! There would likely be lower rates available, (thereusually are), but you can’t do a FREE TRANSFER if you have acollateral mortgage.The bank may also use the collateral mortgage to o*set other mortgagedebt, your car loan, credit card debt, or line of credit.If your banker declines an increase of funds to you at a later date you can’tdo anything about it. You would have to pay the bank in full plus penalties &legal fees. You cannot put a second mortgage behind the bank’smortgage because the bank has registered 100%-125% of theproperty value. You think you have equity but you don’t!This is why many of the major banks are switching to collateral mortgages.Many of them don’t have any other options now, other than collateralmortgages.
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