Combining mortgages and credit lines in a package may seem
attractive as it helps save costs of taking out a new loan. But real estate
lawyer from Toronto, Robert Aaron says
that such contracts may expose borrowers to extra charges when they make a
decision to switch lenders. They may also prevent them from getting additional
credit from other lenders.
Mr. Aaron gives TD Canada Trust as an example. TD secures
all mortgages with a collateral charge. Borrowers have the option to allow TD
to secure 125% of the home’s value from the onset. In return, they will be able
to save $300-$500 when they need to take out a new loan sometime in the future,
such as for a home remodeling or renovation. But the borrowers will still be
required to meet the lending criteria established by TD and their house value may
also have to see an increase to quality for the extra credit. If this does not
happen, they may be turned away by other lenders too, warns Mr. Aaron.
Experienced mortgage brokers say that
those looking to switch lenders will be required to pay a new mortgage
registration fee. But Chris Wisniewski, TD Canada executive, points out that a
large percentage of mortgage borrowers don’t switch lenders, so the extra cost
is irrelevant for most people.
