FAQ: What is the difference between a conventional and a collateral mortgage?

For many first time buyers, the process can be time consuming and overwhelming. Trying to get your finances in order, get a mortgage, plan for the future, not to mention the rest of your life doesn't stop just because you are buying a home.



If you don't have experience buying a home (or even if you do have experience) it can be a lot of information to take in. One very important part of the process that can be very complicated and confusing is getting a mortgage, more importantly knowing what kind of mortgage get.

It is important to understand the term, rate, payment frequency, etc. registered against your property but it is also important to be clear about the type of mortgage you are getting. You never want to be out of the loop or surprised by documents you receive from the bank regarding your mortgage.

An Options purchaser recently reached out due to her surprise that her bank had registered a mortgage worth double the principle loan amount against her property. This type of mortgage is called a Collateral Mortgage. We want to make sure you are equipped with the info to avoid any surprises of your own.

Many banks, including TD, one of the banks that is familiar with the Options model, are now only offering collateral mortgages. Collateral Mortgages differ from Conventional Mortgages in the following ways:


Conventional Mortgage
When a conventional mortgage is registered you will know:

• What your payments will be 
• Your rate of interest 
• Amortization period 
• When your mortgage will be paid in full 

Unless you refinance to take out equity on your home the balance on a conventional mortgage should only go down.

This type of mortgage can be "transferred" or "switched" to another lender at no cost to you. You can also be approved for a second mortgage (i.e. Home Equity Line of Credit) from another lender. The second mortgage can be registered behind the first mortgage.


Collateral Mortgage

This type of mortgage has become much more common in recent years. In fact, many banks now exclusively register collateral mortgages. A collateral mortgage is basically a loan agreement secured by the collateral security of a mortgage against your home.

Many lenders offer the ability to have a mortgage registered for up to 125 per cent of the value of your home (meaning the balance on your home after your down payment might be worth $200,000 but the mortgage registered against your property could be as much as $450,000.)

One of the benefits of collateral mortgages is that you can go to the same lender and borrow more money (up to the registered limit) without having to register a second mortgage.

Below are a number of drawbacks associated with - and reasons why banks like - collateral mortgages:

• Lenders will not "transfer" or "switch" a collateral mortgage. If you want to transfer your mortgage to another bank you will have to discharge your mortgage and pay the fees to have an entirely new mortgage registered. 
• If you have equity in your home and you have defaulted on another loan or credit card the lender can increase your collateral mortgage and pay out any other unpaid debt without your permission. 
• If you want to refinance your mortgage to consolidate debt, renovate your home, etc. and your primary lender declines you cannot approach any other lenders. 
• 
  

These pieces by Ellen Roseman in the Toronto Star outline some of the pros and cons of collateral mortgages and why you may want to stay away from them:

A collateral mortgage can trap you- http://www.thestar.com/business/2015/02/17/a-collateral-mortgage-can-trap-you-roseman.html
TD pays mortgage discharge cost for client- http://www.thestar.com/business/personal_finance/2015/04/07/td-pays-mortgage-discharge-costs-for-client-roseman.html

It is important when shopping around for a mortgage to know if you are being offered a conventional or collateral mortgage. It is also a good idea to have your lawyer review the paperwork before you sign for any mortgage.

Since many banks now only register collateral mortgages you may not have a choice but to register for one but the more you know about your mortgage the better off you'll be.

Options staff are not mortgage specialists so please do your research! Talk to the experts and never sign a document without knowing what you are agreeing to!

What is the best/worst mortgage advice you ever received? Share it on our Facebook Page or tweet to us @OptionsforHomes.

Federation of Community Power Co-operatives Celebrate Earth Day and Promote Renewable Energy Co-ops

Queen Street Solar Co-operative and Green Timiskaming, through Options for Green Energy, are members of the Federation of Community Power Co-operatives (FCPC).

To celebrate Earth Day 2015 FCPC has been hard at work at an awareness campaign to promote and make some noise about the many advantages of community power.

Infographic from Federation of Community Power Co-operatives

FCPC posted a great blog with information about renewable energy on their new website OurPower.ca. The following is an excerpt from "Renewable energy - not dirty oil - is Canada's key to economic success":

"The economic news today, oh boy: Layoffs, uncertainty, debt, negative growth outlook, deflationary pressures. And that’s just the Monday paper. But it’s Earth Day and that means we should be looking forward toward how we can build a brighter future for our country and our climate.

So it’s exciting that In the midst of all the doom and gloom triggered by the recent rapid slide in oil prices, there is a big bright spot: Canada’s renewable energy industry is booming. In fact, there are now more Canadians directly employed in the green energy sector than are employed in digging sticky tar out of northern Alberta.

It’s a sign of changing times. Yes, Canada can indeed be an energy superpower --just not one that stakes its future on oil and gas. We have abundant sun, wind, water and biomass and we can use these assets to build a bright low-carbon future for ourselves and future generations..."

For the full post visit: http://ourpower.ca/2015-04-22-renewable-energy-not-dirty-oil-canadas-key-economic-success/

Follow Options for Green Energy (@OptionsforGreen) and FCPC (@FCPCoops) on Twitter for green energy updates and information about how you can get involved with renewable energy projects!


Mark this #EarthDay by investing in green energy and take action on #climate.

FAQ: Options seems too good to be true, is it?

Probably the most common question/criticism we hear is "Options seems to good to be true" or "What's the catch?"

Options owner Christie was worried that Options may be too good to be true at first. Then she put her key in the door for the first time as a home owner. See what she has to say about the emotions she felt and some of the questions and comments she heard from her friends throughout the process.

We can tell you that Options isn't too good to be true...

We can tell you that there isn't a catch...

We can tell you we really do offer quality homes at affordable prices to individuals and families with low to moderate income...

...But why don't you let us show you instead...


Attend a free, no obligation information session to learn more and speak with a purchase consultant who can answer any questions you may have specifically about your financial situation.

What have you got to lose by learning more? This could be the year that home ownership is finally within your reach! You'll never know if Options is for you if you don't give it a chance.

Register Now: http://optionsforhomes.ca/register/

Options for Green Energy CEPP Grant

The Community Energy Partnerships Program (CEPP) is a grant program to support community power in Ontario. Options for Green Energy received a $163,000 grant from the program that will go towards both engineering and marketing costs associated with Options for Green Energy Programs.


CEPP funding helps co-operatives to develop renewable energy generation. This grant will allow Options for Green Energy to explore more opportunities for solar installations across Ontario. Some of the costs that the CEPP grant will help to offset include resource assessment, legal services, engineering work, regulatory approvals and co-op related work.


As a non-profit Options for Green Energy aims to keep operating costs as low as possible in order to contribute the maximum amount to community wealth and to ultimately continue to develop sustainable energy projects.


Thank you to The Community Energy Partnerships Program for believing in Options for Green Energy and promoting community based energy projects across Ontario.

Options Referral Bonus

Options for Homes has a special offer at Danforth Village Estates.  Refer a friend to Danforth Village Estates and receive $200 as a thank you once they become a qualified purchaser!

See Christine, an Options purchaser, discuss the referral bonus:

Because Options doesn't use high price advertisements or marketing to sell our condos we rely heavily on referrals.  It is because we have so many amazing purchasers who tell their friends and family about Options that we have had the honour of helping our homeowners create strong, vibrant communities for over 20 years. 

If you know anyone who may be interested in becoming a homeowner at Danforth Village Estates, or any of our other upcoming communities, please have them contact us to register for one of our upcoming information sessions (we hold them every two weeks) at www.optionsforhomes.ca/register or 416-867-1501 ext. 221.