Collateral charges explained. Short and sweet.
A collateral charge mortgage is a method of registering a mortgage on a property's title up to or above the value of the home with the purpose of making futuring borrowing against the home easier. In contrast, a regular mortgage is only registered against the property for the total amount borrowed. Ex: If your home value is $410,000 and you owe $307,000 the mortgage registered against your title may still be as much as $410,000 or even higher. The benefit is supposed to be that you can then borrow money from your home in the future without having to refinance your mortgage, meaning you avoid the legal process however, your lender may still charge a fee to advance additional funds. In order to borrow more you're still required to qualify and an appraisal is still needed which you may be required to pay for. The primary disadvantage to a collateral charge mortgage is that they can't be simply transferred to a new lender in order to take advantage of a better mortgage