Collateral Mortgage

A collateral mortgage (also called a collateral charge) is a type of mortgage registration in which the lender registers a charge on the property for an amount greater than the mortgage loan itself — typically 100–125% of the appraised property value at the time of registration. This contrasts with a conventional (standard) mortgage, which registers a charge equal to the loan amount. Example: You borrow $400,000 on a $500,000 home. A conventional mortgage registers a $400,000 charge. A collateral mortgage might register a $625,000 charge (125% of value). The actual loan amount is still $400,000 — but the registration allows the lender to lend you more in the future (via a HELOC or mortgage top-up) without requiring a new registration, which is costly. Most major Canadian banks (TD Bank was first, followed by others) use collateral charges as their default mortgage product. See HELOC glossary and the FCAC home buying guide.

Key differences affecting borrowers: (1) Registration amount: Conventional = loan amount; Collateral = up to 125% of property value or higher; (2) Transfer at renewal: Conventional mortgage can be transferred to a new lender at maturity at no cost (standard transfer). Collateral charge cannot be transferred — it must be discharged (at cost, typically $800–$1,500) and re-registered by the new lender. This makes switching lenders more expensive and discourages shopping around at renewal; (3) Access to equity: Collateral mortgage makes it easier to draw additional funds without re-registering — beneficial if you want future HELOCs; (4) Sub-accounts: Some collateral mortgage products (TD's HELOC, Scotiabank STEP, RBC Homeline) allow multiple products (mortgage + HELOC + line of credit) under one registration; (5) Payout at discharge: Discharging a collateral charge requires a lawyer, adding cost at sale or refinance. See OSFI B-20 lending guidelines and Canada mortgage transfer guide.

Banks prefer collateral charges for several reasons that primarily benefit the lender: (1) Retention at renewal: Transfer costs discourage borrowers from switching lenders when they find a better rate — keeps customers captive; (2) Future lending flexibility: The large collateral registration enables the bank to offer additional products (HELOCs, top-ups) without new legal work; (3) Bundled product ecosystem: Collateral charges enable multi-product mortgage bundles (STEP, Homeline) that bundle the mortgage with credit products — increasing product attachment and switching costs; (4) Competitive rates: Banks sometimes offer slightly lower rates on collateral charge products because they know retention rates are higher. For borrowers who plan to stay with the same lender long-term and want HELOC access, collateral charges can be fine. For borrowers who want flexibility to shop at renewal, conventional (standard) charges from monoline lenders or credit unions are preferable. See HELOC glossary and the FCAC mortgage shopping guide.

A collateral charge cannot be "switched" in the same way as a conventional mortgage. To move a collateral mortgage to a new lender, you must: (1) Discharge the existing charge: A lawyer must discharge the collateral charge from title — cost: $800–$1,500 in legal fees; (2) New lender registers a new charge: The new lender registers their own mortgage charge — additional legal fees ($500–$1,000); (3) Some new lenders cover these costs: To attract collateral mortgage borrowers, some lenders offer to pay discharge and registration costs as an incentive. Always ask when comparing renewal offers. Contrast: a conventional mortgage at maturity can be switched to a new lender via a simple assignment at low or no cost — the most common way borrowers save money at renewal. This is why financial consumer advocates recommend asking at origination whether the mortgage is a collateral or conventional charge. See Canada mortgage transfer guide and the FCAC mortgage renewal guide.

Collateral mortgages have complex interactions with second mortgages and HELOCs: HELOC from the same lender: Easy and the primary purpose of the collateral registration. Since the bank already has a large charge registered, adding a HELOC sub-limit requires no new legal work — just a product addition. HELOC or second mortgage from a different lender: More difficult. Another lender would need to take a second charge behind the collateral charge. Since the collateral charge may be registered at 100–125% of value, there may be no unencumbered equity for a second lender to register against, even if there is actual equity in the home. This makes accessing equity through a second lender effectively impossible for most collateral charge holders unless the first charge amount is well below the actual equity. Practical advice: If you plan to use a separate HELOC or second mortgage product, a conventional charge gives more flexibility. If you will use the originating bank's own HELOC products, collateral may be fine. See HELOC glossary, second mortgage, and OSFI B-20 guidelines.

As of 2025, Canadian lenders are broadly categorized: Primarily collateral charges (for most products): TD Bank (Collateral Charge, Home Equity FlexLine), Scotiabank (STEP — Scotiabank Total Equity Plan), RBC (Homeline Plan), CIBC (Home Power Plan), National Bank (All-In-One). These bank products are bundled multi-product registrations. Primarily conventional (standard) charges: Monoline lenders (First National, MCAP, RMG, Merix) typically use conventional charges — making transfers easier. Some credit unions use conventional charges. BMO: Offers both — Homeowner ReadiLine (collateral) and standard mortgages. Key takeaway: if flexibility to switch lenders at renewal is important to you, ask explicitly before signing whether the mortgage registration will be a collateral or conventional charge — and choose a lender accordingly. Read the FCAC mortgage comparison guide and the Canada mortgage transfer guide.