Most mortgage holders don’t realize that if they have a Home Equity Line of Credit, they may not get the best rate come mortgage renewal time.

There are other reasons it might cost a homeowner to move their mortgage at renewal too. Recently the Globe and Mail published a great article on the costs of chasing the best rate at renewal.

“On a standard mortgage, the costs of moving may be minimal and the lender who is taking over the loan may be willing to absorb them.

“However, on a collateral mortgage, the fees will be more.

“A standard mortgage is registered for the actual amount of the loan, while a collateral mortgage allows a home to be used as security for more than one loan. The downside is that changing lenders with a collateral mortgage entails paying both discharge fees and new registration fees.”

The cost of moving a collateral mortgage is the legal fees – in Alberta this is typically around $800 plus disbursements. Recently I have had many clients who just aren’t being offered a rate that is even in the ballpark of the best going rates, so it’s made financial sense to incur the legal fees and move the mortgage. In the past, however, this hasn’t always been the case. The interest savings need to be significant enough to warrant the extra cost.

This is why it’s even more important to know what you’re getting into BEFORE you purchase but, if you’re already in this situation, give me a call (403-804-7002) and I can help you determine if you have a collateral mortgage and analyze whether it’s worth it or not to move your mortgage come mortgage renewal.